Feb 21, 2019

Low-risk investments are fueling more private equity repurchases

Dan Primack, author of Pro Rata

Chicago-based private equity firm GTCR this morning announced an agreement to buy insurance broker AssuredPartners from Apax Partners at a reported enterprise value of $5.1 billion (including debt).

The big picture: 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).

  • "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."
  • 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.

Why it matters: 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.

Go deeper: Private equity is coming for local TV

Go deeper

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