The Tentacle

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Consolidation - The pathway to monoculture?

In 2005, following a decade of increasingly rampant consolidation in the broker market, TEn was launched onto an unsuspecting world. As a network model for start-up brokers, the business was in every way a response and a reaction to everything that was happening in the market at the time.

The financial crisis of 2008 certainly slowed things down a bit, as the bidding-battle chickens came home to roost, and the money paid out for brokers that were acquired, no longer equated to their subsequent value. Across a number of prominent players at the time, well over half-a-billion pounds got written off by whichever Private Equiteer was carrying their can at the time.

Lessons must have been learnt, one might assume? Or perhaps not.

Among the TEn founders, there was one who had previously worked for a broker software house and had occasion to purchase a mailing list of brokers in 1991/92. There featured 12,000 on the list, although this included some branches, thus reducing the number of distinct entities to nearer 11,000.

In 2005, the widely accepted number of brokers was down to about 4,500. And, 16 years later, where are we now? Closer to 2,500?

And where does it end, or does it?

In 1970, another of our founders joined Eagle Star from school. As part of his induction, he discovered that they had 370 branches in those days. 50 years later, what was Eagle Star is now Zurich and 14 locations is what their website says. That’s a little over 96% less.

Presumably, if one could look at the arithmetic of Aviva’s constituent parts existing in the early 70s, or RSA, or Allianz, a not dissimilar shrinkage would be found. Something over 90% should come as no surprise to anyone.

Of course, it could be argued that these historical branches were just that, branches not individual businesses. True enough, but they dealt directly with clients to a large extent in those days and, their closure gave rise to a huge expansion in the number of brokers to replace them. This was as the local branch managers, deputy managers and/or inspectors took redundancy or resigned, to continue to service their clients as brokers.

While they were not independent businesses, they subsequently became so.

And are brokers now headed the same way after half-a-century? Will the 11,000 of the early 90s become 500 - or fewer - by 2041? Inevitably, give or take a percentage point, the answer has to be yes. What used to be a bio-diverse rain forest could, in many ways, more closely come to resemble a monoculture dedicated to the production of palm oil.

The analogy above is not absurd, because the processes and the motivations that apply to businesses, are the same everywhere and in every context.

Does this mean, therefore, that the TEn project has been a failure? Well, certainly, we haven’t managed to repopulate the broker planet as quickly or as vigorously as we would have liked.

But, if we have been in some way responsible for a noticeable portion of the remaining 500 and we remain present at the birth of more each year, then we should be able count ourselves as having made a difference.

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Site map coming fairly soon... the New Year probably.

The site map will be an aid to navigation around our various websites. Of course, these sites have just undergone a major structural update and things are still changing.

So, it’s a bit like when a supermarket periodically shifts things around, either, just for the hell of it, or, because they have decided to squeeze in a click & collect point, where the bread used to be.

As stuff relocates, consequently, leaving the signs above the ends of the aisles as they were before, could become confusing.

Our current situation here is very similar.

Mind you, whether before or after the reorganisation, you can never find the Tahini paste. You always have to ask.