LDC Backs Management of Direct Group in £40m Deal
06/08/2007 09:00:00 by Marketing
Derek Coles and Scott Hough have led the management team of Direct Group, a provider of business process outsourcing services to the insurance sector, in acquiring the business in a £40 million deal with the backing of mid-market private equity firm LDC and a debt package from Barclays.
Based at sites in Doncaster and Halifax, Direct Group provides a range of value-added services to insurers and corporate partners, including policy administration and fulfilment, commission management, premium collection, claims handling and performance reporting.
The business works across multiple insurance product sectors of property, motor, life and casualty, focussing predominantly on property and protection insurance schemes.
In recent years, Direct Group has successfully evolved from a niche third party administrator to a broader capability of a ‘managing general agent’, working as an intermediary for both insurers as well as corporate and affinity product distributors, who use Direct Group to provide innovative insurance products and services and source underwriting capacity.
The business has a very flexible technology platform and provides added-value services, including product design and development. This enables providers – such as lenders and underwriters - to work with Direct Group to develop tailored products for its distributor partners and use its technology to deliver new products and services to the marketplace quickly and effectively.
LDC has invested £21.3million for a significant minority shareholding, with the balance of equity held by first and second tier management teams. Debt funding was provided by Barclays Leveraged Finance team in Manchester.
The business has been acquired from a number of exiting shareholders, including two of the original founders, and Barclays Private Equity, which backed a management buyout in 2002.
As part of the deal, Ray Stenton, Investment Director at LDC, will join the board as non-executive director.
He said: “There are a number of strengths to Direct Group. We’ve been hugely impressed by its operational efficiency, which is driven by a highly automated IT infrastructure enabling the business to provide an unparalleled quality of service to its clients. It has also successfully evolved into an added-value partner providing a wide range of services across a diverse range of product areas, enjoying excellent relationships with insurers and distributors. Add to that an excellent management team led by Derek Coles and Scott Hough, we believe the business is well placed to capitalise fully on a dynamic marketplace that is seeing rising demand for partners like Direct Group.”
Derek Coles, who becomes Chief Executive of Direct Group, said: “This is a transformational deal for everyone at Direct Group. LDC is the ideal partner to help us deliver our future growth plans for the business. Very early on, Ray and his team demonstrated the same passion that has propelled us onwards over the last few years. We enjoy a high level of credibility in the insurance market – securing the backing of an investor like LDC can only enhance that.”
The deal was originated and led by Andy Westbrook and Claire Frangou at Deloitte.
Andy Westbrook said “This deal should provide the launch pad for a period of rapid growth for Direct Group and enables its highly incentivised and talented management team to capitalise on the core strengths of the business and benefit from the strong support of LDC. We wish the team every success for the future.”
Other advisers included Neal Shepherd of DLA (LDC), Peter Halpin of Eversheds (Vendors), Deloitte (Tax, Commercial Due Diligence and Debt Advisory), KPMG (Financial Due Diligence) and Ernst & Young (Exit review).
For more information please contact marketing@directgroup.co.uk
