Tag Archives: marketplace

Moving Past ERM: New Focus Is ERRM

No, the title does not have a typo. ERRM refers to Enterprise Risk and Resiliency Management. And, no, it is not necessarily new. When ERM is practiced in a mature and robust fashion, it should add to an organization’s resiliency.

Resilience refers to both the ability to rebound after a loss has occurred due to risk that could not be fully mitigated or was unrecognized and also the ability to capitalize on the upside risk.

Let’s look at two scenarios.

Company A, an industrial manufacturer, implemented ERM several years ago. Its risk committee, recognizing changing climate conditions and weaknesses in an aging facility, got approval for a multi-year investment in flood protection. This decision was made part of the strategic plan. Not only did the company invest in flood gates for its access points to lower levels, but it also cemented over unneeded windows and redesigned storage racks at sub-levels. All drainage lines around the facility were tested and repaired, if required. Very importantly, its business continuity and disaster recovery plans were updated and had been rehearsed doing table top rehearsals. So, when a one-in-50-year flood occurred and crippled other businesses in the area for weeks, Company A was virtually unaffected. It was able to resume full business operations in two days. On top of that, it was able to capitalize on the excellent press coverage it got locally, which enhanced its ability to attract the talent it had been seeking from the area.

For this company, ERM was more than identifying risks and creating reports. It was about taking action to build true resiliency in the face of risk.

See Also: How to Measure the Value of ERM

Company B, a woman’s clothes design and manufacturing company, practiced ERM with a very strategic approach. By that is meant, the risks to the company’s strategic direction were focused on first and became a key component of the risk identification and mitigation processes. When changes in customer preferences and buying habits were identified as risks to the current strategy, the strategy was adjusted accordingly. Since women were trending toward buying fewer and more basic garments, (for example, slacks that could be worn with multiple tops), while buying more accessories at more expensive prices, the company added new product lines such as jewelry and handbags.

As margins became squeezed at less diversified companies, this company prospered. Its quick reaction to emerging risk by adding product lines was rewarded with year-over-year return on equity (ROE) increases for each year of the strategic plan period. In other words, the company found the upside of risk and enhanced its resiliency because of it.

These hypothetical companies, based loosely on actual ones, illustrate that ERM is not just about risk; ERM is about resiliency. It is about the ability to address risk in such a way as to wind up in as good or better a position as the company was before having dealt with the risk or its impact.

How do companies embed resiliency into their ERM programs?   Each of the following points enables greater resiliency, when practiced consistently:

  • ERM needs to be strategic. First, risks to the strategy must be analyzed as well as operational and other risks. Second, risk mitigation plans for all risks that require a significant commitment of organizational resources need to be documented in the strategic plan to ensure there is proper allocation of such resources. In its fifth annual risk report, PwC has a recommendation that reinforces this idea while adding the element of business continuity planning, “Ensure strong triangulation between strategy, risk management and business continuity management.”
  • ERM must be seen to offer insights not only to the downside of risk but also to the upside. How does a given risk offer an opportunity in addition to or instead of a threat? If rising raw material costs are posing a risk to profitability, how can buying consortiums, vertical integration, multi-year contracts or changing the material composition of products pose opportunities? Innovation has a role to play in seeing and responding to the upside of risk. Indeed, risk and managing risk can be catalysts for innovation.
  • ERM mitigation plans need to be as bold as necessary to meet the potential impact level posed by the risk. For example, it does little good to mitigate a reputational risk by issuing a statement of corporate values when hiring a new senior team is what is needed. A particular mitigation plan may need to be as big as entering a new market or leaving an established one, moving a manufacturing center to a new location or making a sizeable technology investment to stay competitive or safeguard property.
  • Business continuity and disaster recovery plans are not sufficient to create resiliency. Public relations plans are also necessary to support resiliency. When there is a serious, public risk event, stakeholders want to know the what, why and how it will be handled. Companies such as British Petroleum (during the BP oil spill in the Gulf) and Toyota (during the faulty power window allegations and recall) learned that statements by CEOs could make the situation worse than it already was thereby heightening the risk. PR plans need to spell out how the company will communicate in terms of transparency, tone and types of meaningful responses it is prepared to make to address the issue in question.
  • ERM must be a continuous process where risks are updated and mitigation plans are monitored and adjusted on a regular basis. Given the pace of change, the ERM process must be as dynamic as the environment within which it exists. When a risk morphs, the actions planned to address it must morph with it, when new risks emerge, tactics to deal with them must be developed. Complacency or slow reaction time will sabotage an ERM process. As such, neither must be allowed to invade the process. If they do, resiliency will surely be sacrificed.

The marketplace continues to see seismic disruption and more massive shocks than ever before. Companies lacking the ability to bounce back from the effect of these will not be able to survive long-term. That is why every effort must be made to create a resilient form of risk management that deserves to be labeled ERRM.

Healthcare Costs: We’ve Had Enough!

Healthcare is consuming an ever-greater share of corporate America’s balance sheet. According to the latest Kaiser Family Foundation survey, today’s employers spend, on average, $12,591 for family coverage—a 54% increase since 2005.

Some companies have finally had enough. Twenty of America’s largest corporations—including American Express, Coca-Cola and Verizon—recently formed a coalition called the Health Transformation Alliance. They’re planning to pool their four million employees’ healthcare data to figure out what’s working and what’s a waste of money.

Eventually, they could leverage their collective purchasing power to negotiate better deals with healthcare providers.

It’s a worthwhile experiment. The government has largely failed to rein in spiraling healthcare costs; in fact, by over-regulating the healthcare marketplace, it’s largely made the problem worse.

The private sector will have to take matters into its own hands and find ways to creatively deploy market forces to its benefit.

Collectively, U.S. employers provide health coverage to about 170 million Americans. Because many pay part—if not all—of their workers’ premiums, they’ve borne the brunt of the upward march of healthcare costs. According to the Kaiser Family Foundation, premiums for employer-based family insurance have increased 27% over the last five years, and 61% over the last 10.

Unfortunately, this growth won’t slow any time soon. The Congressional Budget Office estimates that average premiums for employer-based family coverage will reach $24,500 in 2025—a 60% increase over premiums today.

Understandably, companies are desperate to find ways to curb their healthcare spending.

Last year, one of every three employers reported increasing cost-sharing for employees, through higher deductibles or co-payments. Another 15% said they cut worker hours to avoid falling afoul of Obamacare’s employer mandate, which requires firms to provide health insurance to anyone working 30 or more hours a week.

See Also: Radical Approach on Healthcare Crisis

But shifting costs elsewhere simply masks employers’ health-cost problem. They’ll have to address inefficiencies in the way healthcare is delivered to bring about savings that will actually stick.

The Health Transformation Alliance sees three primary ways to do so.

First, companies will have to mine their healthcare data for insight, just as they analyze the numbers for sales, operations and other core business functions.

The Alliance will examine de-identified data on employees’ health spending and outcomes. The hope is to determine which providers are delivering the best care at the lowest cost and to then direct workers toward these high-performing providers.

The U.S. healthcare sector today is awash with ambiguity and a lack of transparency. A knee replacement can cost $50,000 at one hospital but $30,000 at another. Two hospitals may offer the same price on a procedure, but one may have a higher rate of infection.

Such differences matter. According to a 2013 report in the Journal of the American Medical Association, an infection can add, on average, $39,000 to a surgery’s price tag.

Second, employers will have to use their combined buying power to secure better deals on healthcare. Tevi Troy, the CEO of the American Health Policy Institute, the organizing force behind the Alliance, said, “If you brought together multiple employers, you would have more leverage, more covered lives, more coverage throughout the country in terms of regional scope.”

In other words, there’s safety—and potentially lower healthcare costs—in numbers.

Third, employers will have to educate their workers about how they can secure better care at lower costs.

Most consumers are clueless about where they should seek healthcare. They may welcome a gentle nudge from their employer toward a high-quality, low-cost clinic or provider. If it saves their bosses some money, all the better.

See Also: What Should Prescriptions Cost?

And as the Alliance hopes to prove, it’s a lot easier to borrow another company’s successful strategy for executing those nudges than to create one from scratch. An educational campaign that resonates with Verizon’s 178,000 employees, for instance, may do just the same with IBM’s 300-some-thousand staffers.

As Marc Reed, chief administrative officer of Verizon, explained, “What we’re trying to do is to make this sustainable so that kind of coverage can continue.”

Corporate America has been saying for years it cannot afford the healthcare status quo, with costs rising ceaselessly. But if employers use their healthcare data wisely—and capitalize on their collective bargaining power—they may discover that salvation from their health-cost woes lies within.

Group Insurance: On the Path to Maturity

The group insurance market shows real promise, but most carriers are still trying to determine the best path forward. Moving from being in a quiet sector to the front lines of new ways of doing business has shaken the industry and confronted it with challenges – and opportunities – that many could not have foreseen even a decade ago.

For starters, let’s take a look at where the market is right now. Three recent trends, in particular, are having a profound impact:

  • The Affordable Care Act, which has led health carriers to increase their focus on non-major medical aspects of the parts of their business that the legislation has not affected. In turn, this has led to intensifying competition.
  • Consumerism, which has resulted largely from workers’ increasing responsibility for choosing their own benefits. This has created disruption as employees/consumers have become increasingly dissatisfied with the gap between group insurance service, information and advice and what they have come to expect from other industries.
  • The aging distribution force, which means that experienced brokers/agents are leaving the work force and are being replaced by inexperienced producers at decreasing rates or are not being replaced at all.

Group players – which historically have been conservative in their market strategies – focus on aggressively driving profitable growth. To do this, they are concentrating on four key areas: 1) growing their voluntary business, 2) streamlining their operating models, 3) re-shaping their distribution strategies and 4) making significant investments in technology.

See Also: Long-Term Care Insurance: Group Plans vs. Individual

Group insurance is no longer a quiet sector of the industry but instead is in the front lines of developments in customer-centricity and technological innovation.

Growing the voluntary business – The voluntary market has been of interest to traditional group insurance carriers for more than two decades, but the success of the core employer paid group insurance business has resulted in a lack of robust voluntary capabilities. However, with employers shifting more costs to employees, voluntary products have become a key way to manage group benefit costs while expanding the portfolio of employee products.

Some carriers are expanding their voluntary businesses by offering a modified employer paid group product in which the employee “checks the box” to pay an incremental premium and receive additional group coverage (e.g., long term disability (LTD), life and dental). Other carriers are exploring models where employees can sign up for an individual policy at a special premium rate. The former example is a traditional voluntary product, while the latter example is a traditional worksite product. For most carriers, adding the traditional voluntary product is fairly straightforward because it is still a product that the group underwrites. However, more carriers are looking into the worksite product (which AFLAC and Colonial Life & Accident have executed particularly well) because, with the passage of the Affordable Care Act, some see a potential opportunity to reach small businesses that previously may not have been interested in group benefits.

Streamlining operating models – Group carriers also are trying to develop streamlined, cost-effective, customer-centric operating models. The traditional group insurance operating model has been built around product groups such as group LTD, short-term LTD, dental, etc. However, the product-based model is inefficient because it increases service costs, slows speed to market and fails to support the holistic views of the customer that enables carriers to serve customers in the ways they prefer.

Group insurers are now investing both time and capital to understand how to remove inefficient product-focused layers of their operations and streamline their processes to profitably grow. Many have focused on enrollment, which cuts across products and is a frequent source of frustration for everyone. Carriers are frustrated because they can spend days and weeks trying to ensure that everyone is properly enrolled in the right plan. Moreover, what should be a fairly straightforward, automated process often can require considerable manual intervention to ensure that employees are properly enrolled. In the meantime, employees are frustrated with recurring requests for information and the slowness of the enrollment process. Employers are frustrated by the additional time and effort that they have to expend and the poor enrollee experience. Producers become frustrated because the employer often holds them accountable for the recommended carriers’ performance.

Reshaping distribution strategies – In terms of distribution, private exchanges initially promised to connect group carriers with the right customers using extremely efficient exchange platforms. As a result, many group carriers joined multiple exchanges expecting that this model would put them on the cusp of the next wave of growth. However, success has proven more elusive than they expected, largely because they’ve spread themselves too thin across too many, often unproven exchanges. And, while private exchanges still offer great potential, many carriers have now begun to rethink their private exchange strategies with the realization that the channel is not yet a fully mature group insurance platform.

Investing in technology – Whether group carriers are focusing most on entering the voluntary market, streamlining operations or refining their private exchange strategies, successful in all these areas depends on technology. Group technology investments have lagged behind the rest of the industry. The reasons for this range from a lack of proven technology solutions that truly focus on the group market to downright stinginess and the resulting reliance on “heroic acts” and dedication of committed employees to drive growth, profits and customer satisfaction. However, viable technological solutions now exist – and they are probably the most critical element in the march toward effective data integration, efficient customer service and ultimately profitable growth. Every facet of the business –underwriting, marketing, claims, billing, policy administration, enrollment, renewal and more – is critically dependent upon technological solutions that have been designed to meet the unique needs of the group business and its customers. Prescient group carriers understand this and have been investing in developing their own solutions and partnering with on-shore and offshore solutions providers to fill gaps in non-core areas.

Whatever their primary focus – growth, operations or distribution – a necessary element for success is up-to-date and effective technology.

A market in flux

In conclusion, group insurance is in a time of transition. Major mergers and acquisitions have already started to reshape the market landscape, and existing players are likely to use acquisitions and divestitures as a way to refine their market focus. Moreover, new entrants are looking to exploit openings in the group space by providing the kind of focus, cutting-edge product offerings and service capabilities that many incumbents have not. These developments show group’s promise. The winners will be the companies that wisely refine their business models and effectively employ technology to meet the unique needs of new, consumer-driven markets.

Implications

  • We will continue to see group carriers focus on the voluntary market, especially traditional group-underwritten products. They will look to not only round out their product bundle by providing solutions that meet consumer needs, but also integrate their offerings with other employee solutions like wealth and retirement products.
  • Group insurers will continue to aggressively streamline processes to promote productive and profitable customer interactions.
  • Private exchange participation strategy needs to align with target markets goals, including matching products with appropriate exchanges. Focusing on participation means that group carriers avoid spreading themselves too thin trying to support the various exchanges (often with manual back-end processes).
  • Group carriers can no longer compete with antiquated and inadequate technology. Fortunately, there are now group-specific solutions that can make modernization a reality, not just an aspiration.

What the U.K. Can Teach on Aggregators

In the last 10 years or so, the single biggest development we have seen in U.K. personal auto insurance distribution is the phenomenal rise of aggregators – known otherwise as “price comparison websites.” Top aggregators in the U.K. marketplace such as Confused.com, Moneysupermarket.com and Comparethemarket.com have grown, leveraging the high usage of Internet among U.K. households. According to the latest industry reports, aggregators accounted for around 56% of the new motor insurance policies sales in the U.K. in 2013.

The overall potential of aggregator share in the U.K. personal auto new business is capped at around 60%, which means aggregator growth is fast approaching stagnation. Though this is evidenced by the flattening growth we are seeing in recent years when compared with earlier periods (when market share rocketed from 25% in 2007 to 45% in 2009), aggregators are here to stay – purely because U.K. customers still see cheaper cost as the major preference in choosing auto insurance.

For insurers and brokers who operate in markets with a heavy aggregator presence, the options are pretty clear and simple — either to partner with aggregators or to compete with them. There are pros and cons in both these approaches.

The advantages brought about by aggregators to customers are too obvious – exposure to a larger variety of auto insurance products, competitively priced quotes and, most importantly, an efficient purchasing process. For insurers and brokers specifically, aggregators provide medium- and small-sized players (who don’t have the scale to compete with the biggies) the opportunity to generate business by advertising their products at a low marketing cost.  Also, through their online platforms, aggregators collect large quantities of customer data around customer website visits and browsing patterns. These can be gainfully used by the insurers/brokers to build a better picture of their customers’ profile and risks as well as put in necessary checks for improving fraud control.

See Also: Driver Safety Ratings Add Sophistication

Key risks are:

  • Too much emphasis on providing the most competitively priced quote based on a minimal set of questions results in quotes incorrectly priced and a below-par underwriting performance for the insurer
  • Consumers get the ability to make purchase decisions based on what-if scenarios (like inputting lower mileage or switching then main driver to see the resultant reduction in premiums), possibly inducing them to provide incorrect information and purchasing unsuitable cover
  • Reduced due diligence at the underwriting stage associated with online policy acceptance can result in increased risk of fraudulent claims – including instances of intentional fraud such as use of stolen credit card information, dead letter box addresses and identity fraud.

Some large insurers in the U.K. have withdrawn from partnerships with aggregators to compete directly in this space. Aviva, for example, offers a quotes comparison facility on its website, while DLG encourages its customers to go online to its site to avoid paying aggregators’ commissions.

A few major factors that influence large insurers and brokers to move away from aggregators are:

  • Having a product listed consistently lower in an aggregator’s rankings is perceived by insurers as hurting their brand
  • Insurers/brokers rely on opportunities to reward customer loyalty and retention at every possible point (through cross-selling/upselling discounts, etc.) to maximize their revenues, while aggregators thrive on customer churn, leading to a possible conflict in business models and weaker customer relationships

Still, none can deny that aggregators are a fixture in the personal auto insurance business for the foreseeable future. Some larger insurers that offer auto insurance online directly to customers also agree that it’s possible to build effective partnerships with aggregators. Some ways of ensuring success through aggregator channels for insurers and brokers are:

  • Collaborate more closely with aggregators to sell on brand rather than just on price – insurers/brokers will primarily own customer relationships and have profit-sharing agreements in place that provide incentives for aggregators to cross sell more of an insurer’s products apart from auto
  • Build systems to ensure that the wealth of data from aggregators is well-utilized for smarter and more frequent pricing of auto quotes (for example, daily rather than monthly or quarterly)
  • Design and segment customized auto policies specifically for aggregators, with underwriting models reflecting the questions set
  • Ensure that the aggregator online platform is updated on a periodical basis and that all components reflect the preferences of the insurers, brokers, customers etc.

Insurance M&A: Just Beginning

Insurance M&A activity in the U.S. rose to unprecedented levels in 2015, surpassing what had been a banner year in 2014. There were 476 announced deals in the insurance sector, 79 of which had disclosed deal values with a total announced value of $53.3 billion. This was a significant increase from the 352 announced deals in 2014, of which 73 had disclosed deal values with a total announced value of $13.5 billion. Furthermore, unlike prior years, where U.S. insurance deal activity was isolated to specific subsectors, 2015 saw a significant increase in deal activity in all industry subsectors.

The largest deal of the year occurred in the property & casualty space when Chubb Corporation agreed on July 1 to merge with Ace. The size of the combined company, which assumed the Chubb brand, rivals that of other large global P&C companies like Allianz and Zurich. This merger by itself exceeded the total insurance industry disclosed deal values for each of the previous five years and represented 53% of the total 2015 disclosed deal value for the industry. However, even without the Chubb/Ace megamerger, total 2015 deal value was still nearly double that of 2014.

See Also: Insurance Implication in Asia Slowdown

While the insurance industry saw a significant increase in megadeals in 2015, there also was a significant increase in deals of all sizes across subsectors.

Tokio Marine & Fire Insurance’s acquisition of HCC Insurance Holdings, announced in June 2015, was the second largest announced deal, with a value of $7.5 billion. The purchase price represented a 36% premium to market value before the deal announcement.

The largest deal in the life space (and third largest deal in 2015) was Meiji Yasuda Life Insurance’s acquisition of Stancorp Financial Group for $5 billion. The purchase price represented 50% premium to market value prior to the deal announcement and continued what now appears to be a trend with Asian-domiciled financial institutions (particularly from Japan and China) acquiring mid-sized life and health insurance companies by paying significant premiums to public shareholders.

The fourth and fifth largest announced deals in 2015 were very similar to the Stancorp acquisition. They also were acquisitions of publicly held life insurers by foreign-domiciled financial institutions seeking an entry into the U.S. In each of these instances, the acquirers paid significant premiums.

In 2014, we anticipated this trend of inbound investment – particularly from Japan and China – and expect it to continue in 2016 as foreign-domiciled financial institutions seek to enter or expand their presence in the U.S.

Independent of these megadeals, the overwhelming number of announced deals in the insurance sector relate to acquisitions in the brokerage space. These deals are significant from a volume perspective, but many are smaller transactions that do not tend to have announced deal values.

In addition, there were a number of transactions involving insurance companies with significant premium exposure in the U.S., but which are domiciled offshore and therefore excluded from U.S. deal statistics. Some examples from 2015 include the acquisition of reinsurer PartnerRe by Exor for $6.6 billion, the $4.1 billion acquisition of Catlin Group by XL Group and Fosun’s acquisition of the remaining 80% interest of Ironshore for $2.1 billion.

See Also: New Approach to Risk and Infrastructure?

Drivers of deal activity

  • Inbound foreign investment – Asian financial institutions looking to gain exposure to the U.S. insurance market made the largest announced deal of 2014 and four of the five largest announced acquisitions in the insurance sector in 2015. Their targets were publicly traded insurance companies, which they purchased at significant premiums to their market prices. Foreign buyers have been attracted to the size of the U.S. market and have been met by willing sellers. Aging populations, a major issue in Japan, Korea and China, as well as an ambition to become global players, will continue to drive Asian buyer interest in the U.S. However, the ultimate amount of foreign megadeals in the U.S. may be limited by the number of available targets that are of desired scale and available for acquisition.
  • Sellers’ market – Coming out of the financial crisis, there were many insurance companies seeking to sell non-core assets and capital-intensive products. This created opportunities for buyers, as these businesses were being liquidated well below book values. Starting in 2014, the insurance sector became a sellers’ market (as we mention above, largely because of inbound investment). Many of the large announced deals in 2015 involved companies that were not for sale but were the direct result of buyers’ unsolicited approaches. This aggressiveness and the significant market premiums that buyers have paid on recent transactions should be cause for U.S. insurance company boards to reassess their strategies and consider selling assets.
  • Private equity/family office – Private equity demand for insurance brokerage companies continued in 2015, even as transaction multiples and valuations of insurance brokers increased significantly. However, we have also seen increased interest among private equity investors in acquiring risk-bearing life and P&C insurance companies. This demand has grown beyond the traditional PE-backed insurance companies that have focused primarily on fixed annuities and traditional life insurance products. Examples include: 1) Golden Gate Capital-backed Nassau Reinsurance Group Holdings’ announced acquisition of both Phoenix Companies and Universal American Corp.’s traditional insurance business; 2) HC2’s acquisition of the long-term care business of American Financial Group Inc.: and 3) Kuvare’s announced acquisition of Guaranty Income Life Insurance. We anticipate private equity activity will continue in both insurance brokerage and carrier markets in 2016.
  • Consolidation – While there has been some consolidation in the insurance industry over the past few years, it has been limited primarily to P&C reinsurance. With interest rates near historic lows and minimal increases in premium rates over the last few years, we expect the economic drivers of consolidation to increase in the industry as a whole as companies seek to eliminate costs to grow their bottom lines.
  • Regulatory developments – MetLife recently announced plans to spin off its U.S. retail business in an effort to escape its systemically important financial institution (SIFI) designation and thereby make the company’s regulatory oversight consistent with most other U.S. insurers’. MetLife’s announcement was followed by fellow SIFI AIG’s announcement that it intended to divest itself of its mortgage insurance unit, United Guaranty. The two other non-bank financial institutions that have been designated as SIFIs, GE Capital and Prudential Financial, have differing plans. While GE Capital has been in the process of divesting most of its financial services businesses, Prudential Financial has yet to announce any plans to sell assets. In other developments, the new captive financing rules the NAIC enacted in 2015 and the implementation of Solvency II in Europe may put pressure on other market participants to seek alternative financing solutions or sell U.S. businesses in 2016 and beyond.
  • Technological innovations – The insurance industry historically has lagged behind other industries in technological innovation (for example, many insurance companies use multiple, antiquated, product-specific policy administration systems). Unlike in banking and asset management, which have been significantly disrupted by technology-driven, non-bank financing platforms and robo-advisers, the insurance industry has not yet experienced significant disruption to its traditional business model from technology-driven alternatives. However, we believe that technological innovations will significantly alter the way insurance companies do business – likely in the near future. Many market participants are focusing on being ahead of the curve and are seeking to acquire technology that will allow them to meet new customer needs while optimizing core insurance functions and related cost structures.

Implications

  • We expect inbound foreign investment – especially from Japan and China – to continue fueling U.S. deals activity for the foreseeable future. If there is an impediment to activity, it likely will not be a lack of ready buyers but instead a lack of suitable targets.
  • Private equity will remain an important player in the deals market, not least because it has expanded its targets beyond brokers to the industry as a whole.
  • The need to eliminate costs to grow the bottom line will remain a primary economic driver of consolidation.
  • Regulatory developments are driving divestments at most, though not all, non-bank SIFIs. This remains a space to watch, as a common insurance industry goal is to avoid federal supervision.
  • Actual and impending technological disruption of traditional business models is likely to lead to increased deal activiy as companies look to augment their existing capabilities and take advantage of – rather than fall victim to – disruption.