An “undervalued” Steadfast is “definitely” an acquisition target, CEO Robert Kelly says – as further consolidation in the broking sector is predicted.

The Steadfast share price sits at about $4.28, down from a high of $6.63 in October last year, but other insurance groups across Australia and worldwide have also been affected by sharp falls.

Late last year, The Australian newspaper reported that a private equity firm was considering a buyout, but Mr Kelly said in December there had been no approach.

In an interview with insuranceNEWS.com.au at last month’s Steadfast Convention on the Gold Coast, Mr Kelly said the business is “always for sale”.

“I think anything’s for sale, as we are,” he said. “Definitely Steadfast is an acquisition target. It’s grossly undervalued at the moment in the market, but in saying that, you have to look at the whole market around the world and put the question: is this a re-rate of financial services worldwide?

“And does that mean that we are valued near where we should be valued? The only way you can tell that is time.”

He said the re-rating is “difficult to absorb” for many businesses.

“The only thing I can say is that we bought most of our assets at 10 times EBITA [earnings before interest, taxes and amortisation].

“I feel sorry for the people who paid 15 to 20 times EBITA and how they’re sitting there with their balance sheets and their ability to try and take that into the public arena at a future time. Because unless it re-rates up, then those acquisitions at those levels are going to be, unfortunately, in private equity for a long, long time.”

Steadfast last week confirmed that it is set to acquire the Envest-owned Resilium and PSC Connect authorised representative networks.

And Mr Kelly says small broking business owners are probably considering their futures in the current economic climate.

“I think there must be a considerable number of small business operators out there ... looking at themselves and wondering, ‘Am I earning more as the owner of the business than I would if I work for somebody in a bigger business?’

“That’s something that people will start to look at in terms of the inflationary cost of living in this country.

“As businesses mature and become valuable, people will seek to take that value out by selling, and companies like us are always looking to acquire good assets.

“I think that the age of the people who are running businesses also forces the succession paradigm from time to time. So I think that’ll mean consolidation.”

Mr Kelly plans to retire as Steadfast CEO later this year but intends to remain on the board.

He told insuranceNEWS.com.au the greatest achievement of his tenure has been “keeping together the strongest and most powerful network of brokers, working together cohesively, pulling together”.

He added that if he were to do anything differently with the benefit of hindsight, he would “be much tougher on the insurers” when Steadfast was starting out.

“I didn’t realise what I had in the early days, and so I was subservient at times when others weren’t, and they took advantage of that. I didn’t realise how absolutely weak distribution had been treated, and how powerful distribution was.

“So I think, if I started today, I’d probably be a different Robert Kelly to the Robert Kelly that was hanging around in 1995.”