Several months of negotiations and meticulous planning peaked in fall 2020 when Tryg submitted its bid for British insurance company RSA Insurance Group. At the same time, international events helped pave the way for the transformational transaction, says Group CFO of Tryg, Barbara Plucnar Jensen.
In a year characterised by the COVID-19 crisis, Brexit and the election of a new American president, Tryg managed to complete one of the largest ever Danish acquisitions. Very recently, the Danish insurance group paid close to DKK 35 billion for RSA Insurance Group's activities in Sweden and Norway, respectively, Trygg-Hansa and Codan. Moreover, it now shares the ownership of Codan in Denmark with Canadian Intact.
According to Barbara Plucnar Jensen, Tryg successfully managed to complete the transaction during such a turbulent time thanks to careful planning and a tirelessly solutionoriented approach.
“Detailed preparation has been an absolute key to successfully completing this transaction. Working on a transaction this size with so many parties involved, it has been essential for us to always be at least two steps ahead of the development. This is also why we have done such meticulous scenario planning – especially in the light of the major international events that characterised 2020,” says Barbara Plucnar Jensen.
Before the recent transaction, Tryg was the market leader in Denmark and the fourth largest market player in Norway. For years, it had looked into the possibilities of strengthening its position, particularly in the Swedish market where the company’s market share was a modest 3.3 percent. However, it was not until 2020 that an interesting opportunity presented itself, and Tryg was in a position to seize it.
The COVID-19 crisis and Brexit played key roles
As COVID-19 spread during the first six months of 2020 and countries went into lockdown as uncertainty grew, several favourable trading conditions were created, which helped enable the transformational transaction.
“In the spring 2020, the stock markets suffered some significant setbacks; at one point, they were down by 30 percent. As you know, many companies bounced back, but that did not happen for RSA, making it a favourable time to bid,” says Barbara Plucnar Jensen.
Tryg worked out a fulfilling set-up with Canadian insurance company Intact to buy RSA Insurance Group together and split its assets among them.
“When that worked out, we felt ready to sign,” says Barbara Plucnar Jensen and continues:
“To begin, an internal team of 14 people dedicated their summer to intense work, supported by experienced advisers and, at a later stage, several internal specialists. Everything was done virtually, from valuation over data room and due diligence to the dialogue between stakeholders."
She adds: “Looking back, lockdown actually worked in our favour. Firstly, it was not clear to others where we were and secondly, COVID-19-related tasks could be used to blur what we were actually doing. It allowed us to work without interference.”
Brexit, too, played a significant role in relation to the transaction. The UK’s exit from the EU was not yet in place, and there was great uncertainty about the outcome.
“One year ago, a British pound cost DKK 8.15-8.17, and it has since hit DKK 8.65. This is significant when completing a billion kroner transaction in pounds,” says Barbara Plucnar Jensen.
”Always expect the unexpected”
When Tryg realised that the transaction might potentially go through, the company established a core team consisting of different functions such as Finance, Legal, Strategy and M&A, and Investor Relations, as well as individuals with deep insight into other relevant aspects, for example the Swedish market. As the work progressed and the possibility of closing the deal became real, Tryg expanded the core team to ensure that the necessary knowledge in several key areas was in place.
“It was essential for us to cover all significant dimensions and be fully prepared throughout the different phases. It was clear to see that Tryg had recent experience with transactions, for example from the acquisition of Alka Forsikring; experienced individuals were involved from A to Z,” says Barbara Plucnar Jensen, adding that this was particularly evident in how the team handled very complex issues:
“Our mantra was “Always expect the unexpected”, and the team demonstrated tremendous drive and a will to find solutions to any challenge we met. When there are bumps on the roads, you can either give up or work hard to find good and constructive ways to solve the problems. I am proud that our team managed to do the latter.”
From the beginning, Barbara Plucnar Jensen was particularly involved in the valuation, synergy work and negotiations. As part of the process, she was responsible for financing, including preparation of the prospectus and ensuring the right investor communication.
“I was very focused on preparing the organisation for the financing process, as this is one of the largest ever capital increases, both for Tryg and in the market. Therefore, I made it a priority to go through the entire process and the tasks directly with all involved parties to ensure that the execution would be as smooth as possible. As a result, our people, the external advisers, the investment banks and others worked exceptionally well together. It was important that everyone was prepared and fully understood their role, their responsibilities and the dynamics of the transaction,” she says.
A detailed script to ensure integration
Barbara Plucnar Jensen and the rest of Tryg now look to the integration. Focus is on getting the engine room to run smoothly, promoting best practices, reaping synergies and retaining the acquired companies’ talent and competencies in order to create value for the company.
“We all have a lot at stake because this is transformational to the company. Our market value increases from close to DKK 60 billion to just under DKK 100 billion, and we share the responsibility to live up to that,” she says.
The four individuals that make up Tryg’s Executive Board have split the tasks between them, so that Barbara Plucnar Jensen is now responsible for all transactional aspects, more specifically financing, legal conditions and ensuring financial reporting and structural matters. However, they are all involved in the integration, which follows the same recipe that ensured the successful acquisition: meticulous planning.
“We have established a transition team working with 12 workflows, which result in a detailed roadmap to guide us from day one, when we get the keys, and going forward. Everything is planned to avoid ‘noise’ for customers and employees alike,” she says.
Despite the detailed planning, surprises are inevitable. However, backed by a team of experienced internal and external resources, Barbara Plucnar Jensen has no doubt about the outcome:
“Surely, not everything will work out exactly as we have planned, but we are prepared to deal with that too.”
Three tips from Barbara Plucnar Jensen
- Be prepared. Many parties are involved in a transaction, and there are many moving parts and many pitfalls. Do careful scenario planning, be rigorous in all phases and surround yourself with experienced people who know their role in detail.
- Take advantage of virtual opportunities. Closed doors and virtual rooms allow you to work without interference. The risk of disruptive leaks increases when large teams fly in and out, read materials at the airport and talk on the phone on the tube. Furthermore, we became extremely efficient, for example, we virtually reached 150 investors globally in just 10-12 days. It felt like we had more hours in the day.
- Be true to your equity story. Your M&A activities must create value and make sense and they need to be in line with your investors’ expectations. Substance and careful preparation of your acquisition are the cornerstones of your investor communication.