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The role of sector-agnostic, situational experts is growing in private equity

Chris.jfif
Chris Scott

November 4th, 2022

The role of sector-agnostic, situational experts is growing in private equity

When global private equity group Searchlight Capital wanted to prepare UK insurance broker Global Risk Partners (GRP) for sale, it had an unusual stipulation for the non-executive director that would help guide the process.

Counter intuitively, an insurance hinterland was put aside. Searchlight and GRP instead elevated the domain expertise of data management and the situational experience of a private equity investment cycle.

This is how Mark Hepsworth (current CEO, Alveo Technology) came to arrive at GRP. He was brought on board with the specific goal of helping GRP with digitisation and using data and analytics to help improve organic growth. The business had grown rapidly through acquisition.

In fact, the growth had been seismic. Since its establishment in 2013, GRP had made no less than 42 acquisitions. When Hepsworth joined the board in November 2020, GRP employed 2,000 staff and controlled or influenced over £1.8bn in premiums, making it one of the top independent insurance intermediaries in Britain.

Importance of Data

Hepsworth arrived at a time when the insurance industry, in some cases belatedly, was coming to grips with the challenges and benefits of modern data management – and GRP wanted to be ahead of the game.

“It was an interesting approach,” he told us. “Searchlight felt they had a good management team in place, and they didn’t want to bring in anybody, frankly, who was going to unsettle that team. I thought it was a good decision. What they wanted was somebody who could focus on data and analytics.”

Although it may seem risky to hire an insurance novice, it highlights a trend in private equity to tap into the talents of experts with high-level situational experience for specific projects that add value, often ahead of an exit.

And that’s certainly what Hepsworth found. “First, I wasn’t going to be a distraction in terms of running the business. And second, it meant I had to focus on where I could add value, which was on the data and analytics side. Candidly, he explains, GRP “could have been a manufacturing firm or an airline” and his approach would have been the same.

Plus, with its history of inorganic growth, GRP was a highly federated firm that acknowledged its need for a data expert. As the management team, backed by the chief executive, told their new board member: “We’re great at growing inorganically but it’s important that we demonstrate strong organic growth as well. In addition, come Searchlight’s exit it would be important to show an acquirer that GRP had a good understanding of all the data running throughout the business.”

Seismic impact

Acquisitions were a very important part of GRP’s growth strategy but there was significant additional upside by leveraging better data and analytics to help the business drive stronger retention and cross selling.

Searchlight were proactive in investing in data and analytics, created a new central team and GRP’s CEO was a strong sponsor behind this initiative.  Hepsworth worked closely with the newly recruited head of Data and Analytics and the GRP senior management team.  The focus was on enabling faster organic growth, specifically by improving the retention of clients, enabling cross-selling, and packaging the data so that it provided value-adding insights to the insurance professionals with their intuitive understanding of the industry.

“We did a lot of work around data governance and data quality, which is the less glamorous part of the story,” Hepsworth recalls. “But if you start churning out bad quality data, you’ve lost the hearts and minds of the business because they know it’s not right. We were highly conscious that would be a consideration from the get-go, particularly because of the federated model of the business.”

Business-friendly data

Once the data team got to grips with the job, it became easier to organise this the significant and growing amounts of data, particularly while GRP continued to make further acquisitions. The team also turned their attention to unstructured data and using AI to more efficiently process and categorises large quantities of data to improve operational efficiency and enable the business to more easily bracket insurance risks.

The pressure was on from the start. “It’s very much about showing the business guys quick wins otherwise you will lose them quickly,” he remembers. “One of the most important things is cultural adoption. We can build this stuff quite quickly, but are the business going to adopt it and use the data and analytics that we’re creating? Otherwise, there’s not much point to it.”

Fortunately, the leadership team got the picture quickly. “They look at the data coming out and they can tell whether it looks right,” says Hepsworth. “Then it’s really about rolling out applications that are intuitive, easy to use, and then helping them easily change their workflow and start using those apps.”

During an 18-month hold, alongside significant M&A, organic growth was able to contribute to EBITDA growing from £45m to £90m. Searchlight sold GRP to US broker Brown & Brown in March 2022, one of the giants of the US industry. The American firm is now a major force in the UK and Irish retail insurance industries.

 

Chris Scott

Partner – Financial Services

chris.scott@draxexecutive.com

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