Mid-market private equity firm LDC has exited its investment in outsourced insurance services provider Direct Group in a deal advised on by Clearwater Corporate Finance LLP.
Direct Group, based in Doncaster, a provider of managing general agent (MGA) and third party administration (TPA) services has been acquired by Ryan Specialty Group (RSG), a US-based insurance services group owned by Pat Ryan, the founder of Aon Insurance. RSG is a global organisation consisting of wholesale brokerage, underwriting managers and other specialty insurance services to agents, brokers and insurance carriers.
The transaction, in which Clearwater advised LDC, has now received regulatory approval from the Financial Services Authority.
LDC backed a management buyout of Direct Group in 2007. Since then the business has made four strategic acquisitions to diversify its outsourced services offering, including insurance broker Millennium in 2008 and Evander Validation Services business in 2010. In April this year it acquired laptop and mobile inspection specialist Circuit, followed by Simple Insurance in June.
The strategy has driven sales growth of over 100% since the LDC-backed MBO. Turnover is currently around £20 million and headcount has increased from 70 to 450.
Paul Jones, a partner in the Clearwater’s support services sector team, said: “The deal demonstrates how specialist insurance support services businesses like Direct Group are proving attractive to larger groups, particularly from the US, that are looking to diversify and expand their reach in the fragmented UK insurance services market.
“Direct Group’s progress has been very impressive, with LDC’s investment used to make strategic acquisitions which have supplemented organic growth. The business fits very well within RSG’s portfolio of insurance services as well as bringing critical mass to its existing TPA activities.”
In the last 12 months, over 80% of Clearwater’s M&A transactions have been cross-border.