Insight and Intelligence on the London & International Insurance Markets 15 Dec 2017

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Hyperion in talks as it seeks fresh capital

  • Adam McNestrie 12 October 2017
  • Distribution giant Hyperion is in talks with a number of financial investors as it looks to raise substantial additional equity capital, The Insurance Insider can reveal.

    Sources said the MGA and broker has retained Morgan Stanley to advise and is looking for buy-in from a long-term capital backer like a pension fund or a sovereign wealth fund.

    With run-rate Ebitda believed to be approaching £150mn ($197mn), the business could attract a valuation in the range of £1.5bn-£1.8bn based on recent deal multiples.

    It is understood the process has only recently been initiated and is in its early stages.

    Sources said that existing institutional backer General Atlantic, which has a stake in the region of 30 percent, has committed to staying in. It is not clear, though, if it may choose to take some money off the table as part of the capital raise.

    The rest of Hyperion is owned by staff.

    Hyperion had previously indicated that its long-term trajectory was likely to take it into the public markets, but in recent years the US distribution space has demonstrated the scope for even businesses of scale like Hub and Alliant to remain in private hands, where they have greater freedom to operate.

    Sources said that Hyperion has continued its rapid growth in the financial year to 30 September, with revenues now believed to be in the region of £500mn.

    Some of the biggest distribution businesses have succeeded in attracting investment from long-term, low-return money, including US wholesale giant Amwins, which has backing from Canadian pension fund PSP, and US retail heavyweight USI, which has support from Caisse de dépôt et placement du Québec.

    Sources said that the Canadian pension funds without major broking plays are likely to be one of Hyperion's first ports of call, with a number of major investors including Ontario Teachers' Pension Plan, Alberta Investment Management Corporation and Ontario Municipal Employees Retirement System falling into this category.

    Banking sources said that sovereign wealth funds were also likely to be tapped, although their experience of investing directly in the insurance space has been limited and their track record chequered.

    Funds that banking sources suggested could be targeted include the Investment Corporation of Dubai, the Abu Dhabi Investment Council, Temasek and the China Investment Corporation.

    Hyperion reported Ebitda of £103mn and revenues of £434mn for the financial year to 30 September 2016.

    Fee businesses in insurance have been commanding Ebitda multiples well into double-digits over the last 12 months, although the bigger deals - all of them in the US - have tended to be in the 10x-12x range.

    Hyperion declined to comment.

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