Axios Pro Rata
February 21, 2019
Top of the Morning
Chicago-based private equity firm GTCR this morning announced an agreement to buy insurance broker Assured Partners from Apax Partners at a reported enterprise value of $5.1 billion (including debt).
Why it matters: Because mid-market insurance is exhilarating.
No? Okay, tough crowd. How about because GTCR previously owned AssuredPartners between 2011 and 2015, and today's news is part of a growing trend of private equity repurchases.
- Just last week, Hellman & Friedman agreed to buy back a majority stake in German online classifieds company Scout24 for around $6.4 billion.
"Private equity firms can't own things forever, so we did embark on a sale process after we worked with management to get the company to a place that far exceeded our original underwriting plans," says Aaron Cohen, a GTCR managing director. "It felt like a natural evolution and allowed management to obtain some liquidity... but we have sort of regretted it since then."
One driver of private equity repurchases, even at higher valuations, is that the investments are largely de-risked. The once and future owner usually knows the management, the sector and where skeletons might be buried (in fact, it might have done the digging).
- In this case, Cohen says that GTCR's original stewardship helped AssuredPartners build out its infrastructure (new offices, etc.) while Apax better "professionalized" the company (hiring heads of IT, etc.). Now GTCR wants to help AssuredPartners expand its specialty verticals via M&A.
Back to excitement: Much of the mid-market brokerage space remains in private equity hands, even though companies like AssuredPartners are certainly large enough to list. The primary reason is that the sector's financial profile is perfectly constructed for PE, with high recurring revenue and cash-flow, plus a diversified revenue and producer base.
- Cohen believes there are up to eight such PE-backed companies capable of being public, but says private equity likely bestow higher valuations than would public traders.
- Just this morning, Aquiline Capital Partners agreed to buy Walnut Creek, Calif.-based Relation Insurance Services from Parthenon Capital and Century Equity Partners.
❓ Answer key: On Tuesday I asked you to name the well-known Silicon Valley VC who's in advanced talks to switch shops, with a hint about how he'd be trading in Sand Hill Road for San Francisco.
- The answer was Keith Rabois, who is leaving Khosla Ventures for Founders Fund, as we first reported yesterday afternoon at Axios. Go here to read more on Rabois, who tells me it was the "most difficult professional decision” he's ever made.
🎧 Pro Rata Podcast: Our new episode focuses on the controversial arrest of private equity investor Mike Calvey in Russia. My guest is Red Notice author Bill Browder, who sees parallels between Calvey's experience and his own. Listen here.
The BFD
Ÿnsect, a French startup that breeds insects to become ingredients for pet food, fish food and plant fertilizers, raised $125 million in Series C funding.
- Why it's the BFD: Because the company claims this deal will let it build the world's largest insect farm. It's also believed to be the largest-ever round for an ag-tech startup outside of the U.S.
- Investors: Astanor Ventures led, and was joined by Bpifrance, Talis Capital, Idinvest Partners, Finasucre and Compagnie du Bois Sauvage.
- Bottom line: The specific bet here in on mealworms, which Ÿnsect argues are more nutritious than the flies bred by its competitors.
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Axios Pro Rata
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