By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
Memphis, Tenn.-based Sedgwick Claims Management Services Inc. and Clark, N.J.-based Global Risk Consultants--leaders in the third-party claims administration and loss prevention businesses, respectively--announced that they are being bought, and both have expressed optimism for the acquisitions. The question is, if there are winners in these deals, will there be losers?
With the Sedgwick deal, one of the questions raised is if the acquisition will make a tough claims administration market even tougher--for the TPAs that is. Prolific workers' comp blogger Joe Paduda posted on his Managed Care Matters about how Sedgwick has been following an "aggressive" approach to growing business and how, with its new owners, the TPA is likely to be "just-as-if-not-more competitive."
"This will mean more adverse winds for TPA operators," he blogged.
For buyers of Sedgwick's claims administration services, of course, aggressive competition among TPAs means lower rates. Bonus in these times, when risk managers cannot shop insurers because collateral requirements are keeping risk managers in one place and they must instead shop their claims service.
"We are excited to be partnering with Stone Point and Hellman & Friedman for the next stage of Sedgwick CMS's growth," said Sedgwick CMS President and Chief Executive Officer David A. North in a statement. "Our clients will continue to receive the same outstanding attention from dedicated Sedgwick CMS colleagues."
For the acquirers--private-equity firms Stone Point Capital LLC and Hellman & Friedman LLC--for a reported $1.1 billion they are getting one of the premier TPAs in the insurance business. And they know it. Stone Point in particular is an astute buyer in the insurance space with many former Marsh employees in its ranks, according to one industry insider. (Sedgwick's sellers include Fidelity National Financial Inc., Thomas H. Lee Partners LP, Evercore Capital Partners, UnitedHealthcare and other minority shareholders.)
Sedgwick has nearly doubled its revenues since Marsh sold it in 2006, from less than$400 million to about $700 in 2008 and 2009 With a sputtering economy, the claims business is in tough times at the moment, but with Sedgwick's focus on large accounts and dedicated business, the third-party administrator has grown and looks to continue to.
"My guess is that number (revenue) will increase rather dramatically for 2010, largely due to new business and more revenue from existing customers," Paduda wrote in his blog, referring to revenue numbers.
According to William F. Ramonas, chairman and CEO of loss prevention and risk management consultant GRC, his firm had initiated a search for a suitor last year. The reason, he said, is that GRC wanted to keep expanding in Asia, Latin America and elsewhere globally but couldn't do it on its own (The firm already operates in 14 countries.)
"We knew with our internal capital, we needed to find a way to do it," he told Risk & Insurance®.
The buyer, Munich-based inspection and certification organization TUV SUD AG, was a "natural" fit, said Ramonas. For GRC, key was that it could maintain its independence, its value proposition as it works with all carriers, brokers and risk managers. Ramonas,declined to elaborate on the deal.
GRC will also continue its partnership, Global Risk Miyamoto, which provides risk managers with site-specific risk identification and analysis services.
Going forward, Ramonas foresees that growth he spoke of, but in the near term, it will be "business as usual," he said.
"GRC will continue to be a legal entity with full profit-and-loss responsibility," Ramonas said, adding that its staff of 350 will remain.
For TUV SUD, GRC represents an opportunity to expand into the U.S. insurance community.
"The acquisition of GRC strengthens our position on international growth markets and gives us access to new market segments and target groups," said Dr. Manfred Bayerlein, member of the board of TUV SUD, in a statement. "The market for independent consultancy in the fields of risk and property-loss control has grown dynamically over the last 10 years, and we assume that demand for the 'unbundling' of technical risk analysis from the issue of insurance policies will continue to rise."
April 25, 2010
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