Carlyle Group in, KKR out of Sedgwick

November 2018 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

November 2018 Issue

Funds managed by private equity giant The Carlyle Group are to become the majority owner of global claims management provider Sedgwick in a deal worth $6.7bn.

Equity for the deal will be provided by Carlyle Partners VII, an $18.5bn fund dedicated to buyout transactions in the US, and Carlyle Global Financial Services Partners III, L.P., a dedicated financial services buyout fund. The deal is expected to close in late 2018, subject to customary closing conditions and regulatory approvals.

Sedgwick’s current majority shareholder KKR will exit its investment entirely four years after it paid $2.4bn for the company. Funds managed by Stone Point Capital LLC and Caisse de dépôt et placement du Québec (CDPQ), together with Sedgwick management, will remain minority investors in Sedgwick.

KKR has led Sedgwick’s growth outside of the US. The company now has a presence in more than 60 markets worldwide as a result of its acquisition of loss adjuster Cunningham Lindsey, which was completed in May. Traditionally, the company focused on claims management, but in recent years expanded into other areas of risk and benefits solutions. On an annual basis, Sedgwick, the US’ largest insurance claims handler, processes more than 3.6 million claims for a wide range of insurance product lines, including workers’ compensation, general liability and disability, and has fiduciary responsibility for claim payments totalling more than $19.5bn, according to a statement announcing the deal.

Carlyle Group is believed to have beaten PE rival and former Sedgwick owner Hellman & Friedman to secure the deal for Sedgwick. “At Sedgwick, taking care of people is at the heart of everything we do, and I am proud that The Carlyle Group appreciates the value our colleagues create when they put our caring counts philosophy into practice,” said Dave North, president and chief executive of Sedgwick. “We are humbled by the confidence they have shown in our business model, and we look forward to partnering with Carlyle on developing and delivering innovative solutions for our clients around the world. We are grateful for the strong and value-added partnership with KKR over the last handful of years.”

“We are pleased to partner with the exceptional management team and highly talented colleagues of Sedgwick,” said John C. Redett, Carlyle managing director and co-head of global financial services. “We look forward to participating in Sedgwick’s next chapter of growth and innovation and working with the company as it builds out its global platform to meet the increasingly complex needs of its clients around the world, while leveraging the One Carlyle network.”

“We have greatly valued our partnership with Sedgwick and its exceptional management team,” said Tagar Olson, director of Sedgwick, member of KKR, and head of KKR’s financial services investing efforts. “We look forward to watching the company’s continued success in delivering high quality technology-driven insurance solutions to clients and consumers around the globe.”

PE firms are increasingly entering the insurance market. In 2014, Apollo Global Management acquired Athene. In 2017, Sovereign Capital agreed to back the management buyout of Irish firm Arachas Corporate Brokers and MGA UK General was acquired by J.C. Flowers and Co.

Carlyle owns stakes in reinsurance business DSA Re, which it acquired from American International Group, as well as a majority stake in wholesale broker JenCap Holdings.

News of the deal for Sedgwick comes in the wake of a very active fundraising period for Carlyle. The firm closed its eighth US real estate fund on its $5.5bn hard cap and its seventh flagship vehicle on $18.5bn over the summer. Carlyle currently has $210bn of assets under management.

Richard Summerfield