The Howden story: How hybrid model of employee share ownership and equity partners helps it achieve ‘best of all worlds’
“One of the unique things about Howden we’ve been able to create is liquidity, because one of the challenges of employee ownership is sometimes if all the employees own the business and it ticks along, how do they grow? If they want to invest and grow through either organic means or by acquiring a competitor, how do they do it, how do they raise that funding?” says Peter Blanc, Executive Chairman of Howden UK & Ireland.
Peter was speaking to the EOA alongside his contribution for Episode 7 of the EOA Podcast, and highlighted the benefits of the employee ownership structure Howden Group has in place to help it achieve growth.
Howden, a trustee member of the Employee Ownership Association (EOA), is an international insurance broking group established in 1994, which has always had employee ownership at its heart.
With 35% of shares in the business owned by employees as the biggest shareholder group, and three different investment houses each owning just over 20%, this ensures Howden stays under employee ownership for the long term.
Alongside this, the private equity investment provides capital to fund acquisitions and enables Howden to run its internal share market for employees.
“That model of achieving the blend, the hybrid of employee ownership and long term, aligned growth equity partners, means we can achieve the best of all worlds,” explains Peter.
“Groupwise we’ve now got 11,500 staff globally, so it’s a big enough beast to do it, but it’s a really interesting model I think other employee-owned businesses could learn from.
“The share price has gone from £5 a share in 2016 to £41 now, so the employees that have been on that journey are obviously delighted and it’s great when you can show that growth trajectory. That helps attract other companies that want to join forces and it also attracts talent.”
Howden creates union as part of transformation
Evidence of this growth can be seen with Howden’s recent transformation programme. The Group has acquired two businesses in the last year or so, both with employee ownership at their core, to create a full-service broker in a union of Howden UK, A-Plan Group and Aston Lark to serve clients from individuals to global corporates.
Aston Lark was the latest of these acquisitions, finalised in April 2022, with around 1,800 employees coming into the Howden family. Peter was chief executive at Aston Lark and says it has found its “forever home”.
The Aston Lark acquisition was Howden’s largest to date, and with it Howden has created a UK business managing over £6 billion of gross written premium for more than 1.7 million policyholders, served by employees across 160 locations in the UK and Ireland.
Peter, who became Executive Chairman of Howden UK and Ireland after the merger, added: “I was determined to make sure the business we built in Aston Lark found its forever home.
“I purchased Aston Scott, as was, in 2015 with private equity backing. Private equity is fantastic in the early days because you get access to funds to enable you to grow rapidly, but the one thing you can guarantee is the business is going to be sold in the future.
“We sold the business in 2019 to Goldman Sachs and by 2021, we’d grown so fast that Goldman Sachs was looking to sell again just two years into the journey. When these sale processes happen so frequently it can become incredibly unsettling for staff, so we sought a different journey.
“The structure of Howden and the way it’s set up as an employee-owned organisation meant we could give staff the continuity of knowing that they’re now in Howden forever, but when it comes up to retirement we’ve also got an annual share market where employees who are shareholders can cash in their shares, go off into the sunset with a cheque in their back pocket and new staff can come onboard as shareholders.”
Cultural and financial benefits of direct ownership model
Howden has an annual share offer which enables any employee to buy shares if they wish, with the minimum investment being £400, while it also has share incentives for things like promotions or achieving targets.
Only employees can be shareholders at Howden, meaning selling the shares if you exit the company or retire – with those shares then offered in the internal share market.
Aston Lark also had a share ownership element, allowing for a smooth transition to Howden, where employee ownership is well ingrained.
“The more people you’ve got working for you that are incredibly motivated, passionate about what they want to do, not just because they’re going to make some money, but because they feel part of something, that creates a great culture and the results we’re delivering are a classic example of proving that model,” added Peter.
“We grow by buying businesses, but we also grow organically. The big part of organic growth is finding talent and if you take on the right talent then the clients follow.
“Yes, we have to pay the going rate for salaries, but as part of bringing talent onboard we bring them into the share ownership, so it creates a different type of recruitment and brings in people that want to build something for the future.
“It’s a tough market for attracting talent, so having a different story that’s not just about pay and rations but about alignment, purpose and what the company stands for is really powerful.”