Merger with Wagner Bujold Leduc: AGA adds shareholders

Following the merger of AGA Benefit Solutions (AGA) and Wagner Bujold Leduc Benefits and Actuarial (WBL), Novacap has becomethe principal shareholder of the new entity.The private equity firm became an AGA shareholder in October 2020

Martin Papillon, CEO of AGA, told Insurance Portal that Novacap now owns a 43 per cent stake in the entity resulting from the merger of the two companies. The management team holds 33 per cent of the shares, and Placements Gabriel Gagnon holds 24 per cent, Papillon adds. 

“Placements Gabriel Gagnon has been one of AGA’s financial partners since we began this adventure,” Papillon says. He and Gabriel Gagnon, together with their partner Chantal Dufresne, Senior Vice-President, Finance and Operations, acquired AGA from La Capitale in October 2013.

Martin Papillon says that the transaction was concluded through various financial arrangements, but declined to elaborate. He insists on calling it a merger. “It's not a sale. The shareholders of WBL, Alain Rivard, Samuel Verreault and Annie Leduc, rolled over a significant portion of their shares into AGA's shares, and are now AGA shareholders." 

Papillon and Dufresne are remaining AGA shareholders. AGA's CEO plans to make more shares available in the coming weeks. “Other members of AGA management will also have the opportunity to become shareholders,” he says, adding that the transaction with WBL is the first deal with another firm since 2013.

After the consolidation in Quebec... 

AGA was already one of the leading group insurance firms in Quebec before the merger, Martin Papillon says. “The merger with WBL confirms our leadership position in Québec,” he says. The new entity will retain the names of both firms for the time being, he adds. 

“The merger brings our group insurance membership to 65,000 and our client base to 1,600,” Papillon continues. “Our premium volume increases to $175 million.” WBL is contributing 400 clients and $45 million in premiums. The merger also increases AGA's presence in Québec City. “There are 100 of us in Montreal and we have 10 people in Québec City. WBL has 20 people in Quebec City,” he says. 

Papillon sees the concentration trend in group insurance distribution as a positive development. He mentions that in recent years, actuarial consulting firms are not the only dominant players in the market; consolidators such as HUB International and People Corporationhave boosted their market shares.  

... Acquisitions in the ROC 

"We feel that with the merger, we have reached the critical mass we wanted in Québec. The next step is to go outside Quebec, because all the great solutions we have developed in Québec also apply outside Quebec," says Papillon.

Since it teamed up with AGA, Novacap has injected funds into the firm and played a key role in its acquisition projects. To date, he says he has evaluated 11 acquisition targets. He has declined some and approached others. “WBL is the first offer that worked out, but there are others in various stages of advancement.” He expects to make more announcements soon. “The market is consolidating and we are one of those who wants to consolidate. We are not for sale,” Papillon says. 

Same values 

Alain Rivard, partner and CEO of WBL, welcomed the merger with AGA. It will allow him to expand his service offering to clients and gain access to new markets, he said at the time of the merger announcement.

AGA Group Insurance and Wagner Bujold Leduc Benefits and Actuarial already knew each other very well, says Martin Papillon. “I have been in contact with Alain for over five years, and I know WBL founder Mireille Wagner very well. I couldn't say who approached whom. We used to meet at conferences, industry forums. This year, the time was right!” 

The alignment of values and similar service models eased the way for the merger, Papillon says. Both companies focus on the private business segment, and both provide actuarial services to corporate clients. “We both have the same rigorous approach. We bring to WBL our third-party administrator and third-party payer (TPA) tools, in which we have invested heavily. WBL had considered creating their own TPA tools; they saw the value in ours," Papillon says. 

System optimization 

In terms of investment, AGA has focused on modernizing customer portals, including the member portal and its user access. In January 2021 it announced a partnership with insurtech Alithya Group to help develop its back-office system through 2025.

“We are further optimizing our systems. We're working more on the internal machine: databases, billing programs and management tools. It's nice to have 65,000 members, but if you want to have hundreds of thousands, you need something else. We want to make AGA a large national firm. WBL is the first step. There will be others," Papillon says. 

Integration and hiring 

In the meantime, the goal is to integrate the two teams. Papillon mentioned managerial discussions on the alignment of best practices and the deployment of common tools. He does not anticipate any job attrition. “This is a growth merger. Prior to the merger, both WBL and AGA had a 10 per cent annual business growth rate. We see a lot of opportunity for growth in the industry. We still have half a dozen open positions. There are no layoffs,” he says. 

Novacap's role: Nurturing entrepreneurship  

“In its business model, Novacap wants to partner with entrepreneurs and inject capital into corporations to support their growth. It does not acquire them 100 per cent and then manage them. This model preserves the entrepreneurial spirit," Papillon told Insurance Portal.

Novacap is not limiting its investments to the insurance sector. The firm announced on Sept. 17, 2021 that it has acquired a substantial equity interest in Plusgrade to support the strong growth of its value-added solutions in the travel industry. An upgrade technology firm, Plusgrade serves the ancillary revenue and marketing segments of the global travel industry.

A private equity firm founded in 1981, Novacap has over $8 billion in assets under management. It has invested in more than 100 companies and completed more than 150 acquisitions. The firm says it has been applying its sector-focused approach since 2007 in technology, media and telecommunications (TMT), industries and recently financial services. Novacap believes that its deep domain expertise in these areas can accelerate companies' growth and create long-term value.