M&A deal sees brokerage expand into the child and youth care space

With the Ontario government poised to pump more funding into child care services, the timing was right for brokerage McFarlan Rowlands to acquire Magenta Insurance Professionals, a niche insurance broker focused on children and youth activities, says McFarlan Rowlands CEO Burke Neale.

Magenta has two decades of experience in programs specializing in child and youth care, education, and other youth activities. Neale spoke to Canadian Underwriter last Wednesday about the deal, which was effective June 1.

“Lisa Vercillo, who owns Magenta, she started this program years ago,” Neale said. “She was looking for a brokerage that could help her grow it. And the Ontario government has certainly thrown a lot of money at child care. There is a lot of money being poured into daycare and child care spaces. So we believe that’s a golden opportunity for us. Magenta is a small brokerage. Lisa needed some scale in order to take it to the next level.”

In its Early Years and Child Care Annual Report 2020, Ontario committed to investing more than $2 billion in early years and child care funding, including approximately $375 million for the Ontario Child Care Tax Credit. Also in 2020-21, it committed to creating up to 30,000 child care spaces in schools over five years, including up to 10,000 spaces in new schools. Plus, it is looking into allocating $208 million to municipalities to support wage enhancements for eligible child care professionals.

With the acquisition of Magenta, southwestern Ontario-based McFarlan Rowlands has continued its strategy to diversify its portfolio and provide regional solutions for niche industries. Earlier this year, McFarlan Rowlands completed the purchase of Aylmer, Ont.-based Hamilton Ward & Cathers Insurance, which places home, auto, and commercial insurance, including insurance for classic cars, tenants, condos, contractors, manufacturers, and farms, among other things.

Burke said the Magenta acquisition aligns well with other of McFarlan Rowland’s niche product offerings, which relate to youth and mental health services. “We already have a program for the Red Cross instructors all across Canada, which includes youth swimming lessons,” Burke said. “We also have, and this is not necessarily youth-oriented, but we have a psychology program — we insure psychologists, psychoanalysts, psychotherapists, and the like. We insure them across Canada. This [deal] allowed us more scale.”

For Vercillo, president of Magenta, “being part of a much larger organization gives our team the markets and enhanced capabilities to support the needs of our clients,” she said in a release announcing the deal. “A large part of the decision to join McFarlan Rowlands was the culture. I know it’s a good fit for our team and our clients.”

Neale described the culture at McFarlan Rowlands as “very family-oriented.”

“We care about the people who join us,” said Burke. “We want to protect their staff. Their people mean a lot to them. We don’t [want to] turn their lives upside down.”

Asked about the possibility of future acquisitions, Neale said McFarlan Rowlands was being strategic about the acquisitions it wished to pursue, and didn’t wish to make deals for the sake of making deals. He said the plan is for balanced growth in the future, with about 50% of that growth being organic and 50% through mergers and acquisitions activity.

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