KKR and CDPQ to buy USI Insurance Services for $4.3bn

May 2017 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity (PE) firm KKR and Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) have announced their intention to jointly acquire USI Insurance Services (USI) from Onex Corporation and its affiliates in a transaction which values the insurance brokerage at $4.3bn.

As partners with equal ownership, KKR and CDPQ – both of which have a strong track record in the financial services and insurance-related sectors and have been longstanding partners in multiple investments over the years – are looking to pursue attractive investment opportunities in high quality businesses with a longer duration and a lower risk profile in order to support strong management teams and facilitate long-term strategic business building.

With more than 4400 professionals operating out of 140 local offices throughout the US, USI delivers property and casualty, employee benefits, personal risk and retirement solutions. USI has become an industry leader by attracting best-in-class industry talent with a long history of deep and continuing investment in local communities.

The investment to acquire USI, which has over $1bn in revenues and operates out of 140 local offices serving every state, will primarily be made through KKR and CDPQ’s core private equity partnership, which includes funds from KKR’s balance sheet and from CDPQ’s pool of capital.

“USI is a fantastic company and is uniquely positioned to help address the risk management, insurance and employee benefits-related needs of small and medium-sized business owners,” said Tagar Olson, head of KKR’s financial services investing practice. “We look forward to working with CDPQ in helping management achieve its long-term vision to grow the business through accelerated investments in USI’s people, technology and solutions.”

A leading global investment firm that manages investments across multiple asset classes including PE, energy, infrastructure, real estate, credit and hedge funds, KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. Moreover, KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business.

Mr Olson continued: “Our successful experience in the insurance and benefits brokerage industry, coupled with the impressive track record of the USI management team, give us confidence in our ability to generate compelling returns while growing the business over the long-term.”

KKR’s co-investor, CDPQ, is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As one of Canada’s leading institutional fund managers (with over $30bn of assets under management), CDPQ invests globally in major financial markets, PE, infrastructure and real estate. Additionally, CDPQ’s private equity team has significant expertise both as a direct investor in companies and as a partner in investment funds.

“CDPQ and KKR are co-leading this investment and leveraging their respective expertise in the sector to support USI’s world-class management as it pursues its strategic plan for long-term growth,” said Christian Puscasiu, co-head of PE direct investing at CDPQ. “Our partnership was established to implement both firms’ patient, disciplined and collaborative investment approach. USI operates in a resilient sector characterized by stable, long-term returns and serves small and medium-sized businesses, which are the cornerstone of the US economy.”

The acquisition of USI by KKR and CDPQ is anticipated to close by the end of the second quarter of 2017 and is subject to customary conditions, including regulatory approvals.

“We are passionately committed to continuing and accelerating USI’s growth and investment as a leader in our industry,” said Michael J. Sicard, chairman and chief executive of USI. “We are excited to work with our new partners at KKR and CDPQ, and want to thank our partners at Onex for the tremendous support they provided to USI.”

Fraser Tennant