Targets: Renaissance Agencies Inc., Portal Group Holdings Inc., Personal Insurance Administrators Inc., Commercial Insurance Group Inc., and Haas & Dodd Inc.
Sponsors: Parthenon Capital and Century Capital Management
Financial Advisors: Portal: Barrington Associates; Renaissance: Hales & Company; Haas & Dodd Inc: Marsh Berry & Company Inc.
Legal Advisor: Sponsors: Kirkland & Ellis
In the space of about three weeks, the two LBO shops closed an impressive five add-on acquisitions for Ascension Insurance Inc., putting the Kansas City, Mo.-based company in new geographies with a range of new service offerings.
Add-on acquisitions have generally become a larger part of the buyout universe since the recession took hold. They represent a way for buyout-backed companies to gain market share at a time when the competition may be getting squeezed by the economic downturn. Another driving force for the trend is that many small companies are seeking stability these days, making them more willing to partner up with larger entities. In the first six months of this year, 107 control-stake deals, roughly 48 percent of the total 221 deals closed by U.S. buyout shops, were add-on acquisitions, according to Buyouts.
However, one would be hard-pressed to find another LBO platform company that’s been able to pull off what Ascension Insurance did in such a short period of time.
Between June 19 and July 7, the company closed on the acquisitions of:
• Renaissance Agencies Inc., a Santa Monica, Calif.-based firm that specializes in the development and placement of student health insurance programs;
• Portal Group Holdings Inc., a Walnut Creek, Calif.-based agency focused on employee benefits and retirement services, to non-profit organizations;
• Personal Insurance Administrators Inc., an Agoura Hills, Calif.-based third-party administrator of student health insurance programs;
• Commercial Insurance Group Inc., a Charlotte, N.C.-based provider of property and casualty insurance for businesses and individuals; and
• Haas & Dodd Inc., an Atlanta, Ga.-based property and casualty insurance brokerage firm.
“Each of these five deals, puts us further down the path of creating a leading mid-market brokerage focused on esoteric, niche lines of insurance coverage that are not provided by your typical mom-and-pop on Main Street,” Jon Grad, a managing partner at Parthenon Capital told Buyouts.
Including these most recent deals, Ascension Insurance now generates north of $70 million in annual revenue. The goal of Parthenon Capital and Century Capital is to get the company up to about $200 million in revenue during their ownership.
Ascension Insurance raised a new credit facility to help support its acquisition of three of the companies: Renaissance Agencies, Portal Group and Personal Insurance Administrators. The refinancing led to Fifth Third Bank joining Ascension Insurance’s existing senior syndicate, which included Madison Capital Funding as lead agent and ING Capital and NewStar Financial as club members. AEA Mezzanine was brought in to provide a subordinated tranche.
Andrew Dodson, a principal at Parthenon Capital called the refinancing “significant” and said it paves the way for more add-ons down the road. “More than 25 percent of our debt facility is currently undrawn, so we do have the wherewithal, combined with equity from Parthenon and Century, to continue to be active acquirers.”
Grad said the insurance brokerage industry tends to have fairly stable revenue and earnings characteristics, which makes it akin to “a harbor in the storm” when the economy gets rough. Even so, Grad said he sees the fragmented sector as one that’s largely neglected by private equity due to its particular nuances; it’s regulated by the government, it has a terminology and lingo all its own, and the financial statements can be difficult to read. “There’s just a lot to understand, and it can be treacherous if you don’t know what you’re doing,” Grad said.
Parthenon Capital and Century Capital teamed up in 2007 to form the Ascension Insurance platform. To lead the enterprise, the firms tapped current CEO Leonard Kline, Jr., who previously was CEO of Compass Insurance Inc., the insurance brokerage unit of Compass Bank, and who prior to that spent about 15 years at Marsh & McLennan (now known as Marsh Inc.).
In January 2008, Ascension Insurance made its first two acquisitions: Bryan Wharton & Associates, a provider of employee benefits and risk management services in the greater Atlanta area; and Pan American Underwriters Inc., a property and casualty insurance brokerage based in Southern California. Including its five most recent add-ons, the company has made a total of 10 acquisitions in the past 18 months.