"What has changed is the launch point," said David L. Eslick, chairman and chief executive, who came aboard in January. "When I joined the firm, we basically agreed that the best way to really get to the size we wanted to get to, in the time we wanted, was to really utilize acquisitions."
When Marsh Inc., Marsh & McLennan's brokerage arm, first discussed its plans for the agency last year, the strategy was to use business already in-house from prior efforts to target the smaller market.
Instead, Eslick said, the agency is going to be built around a model utilizing eight or nine regional "platform" companies around which it will build up the agency's business infrastructure, with only small corporate staff based in New York.
"Our key leadership ? around driving the strategy to win in the marketplace, around attracting clients and keeping clients and expanding the services we provide those clients ? will be primarily driven from a regional basis," he said.
Eslick said he is negotiating with a number of brokerages and agencies with the size and capabilities needed to become the platform businesses around the United States.
"I'm ecstatic with the pipeline," he said. "We have an ongoing dialogue with a very good number of very high-quality organizations."
The Marsh plan to aggressively grow Marsh & McLennan Agency by acquiring a large number of smaller agencies and brokerages is part of what Eslick says is a marketplace containing "over 13,000 independent brokerage firms serving the middle-market and smaller business, and accounting for about $30 billion in commission revenue."
But that expansion must wait until the platforms are in place, he said.
"We feel comfortable that we will have a couple of our initial platforms in place by the end of this year," Eslick said.
Last year, Marsh & McLennan Cos. made about $500 million worth of its stock available for future acquisitions, in a shelf registration statement it filed with the U.S. Securities and Exchange Commission.
Eslick said his efforts have not been impeded by the blighted economy
or the soft insurance market. In some ways, he said, the economic fallout has worked to Marsh's advantage by knocking down the competition for acquisitions.
"Many of the aggressive acquirers you saw out there over the last five years have now gone away, for a number of reasons tied into what's going on with the economy, but also tied into players who used a lot of leverage before where that's not available now," Eslick said.
Banks are "sellers rather than buyers" of insurance businesses, he said, and private equity firms
also have been curtailed because they no longer enjoyed "the flexibility and ease of capital both on the equity and on the debt side."
Some of the large brokerages bought out by private equity firms also are hampered in making acquisitions, he said, because "they have capital structure situations that really kind of bind them in terms of capital acquisitions."
Marsh Inc. is the second-largest broker in the world based on brokerage revenue, according to the Best's Review ranking of global brokers.