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R&Q closes in on hedge fund partnership

Randall & Quilter (R&Q) is closing in on a capital partnership with a US hedge fund in order to boost its acquisition firepower.

As first revealed by The Insurance Insider, the UK-listed insurance service provider and run-off acquirer has been seeking a partnership with an investor that will enable it to expand its acquisition net to larger value receivables.

R&Q's chief financial officer Tom Booth said he hoped to have a partnership in place by autumn.

"It's really going to start with the insurance/reinsurance claims acquisition activity. We are in late stage talks and are now in the process of finalising documentation with a US hedge fund," he explained.

R&Q will essentially set up a facility with their unnamed partner whereby the hedge fund will have the right of first refusal on any receivables business R&Q wishes to acquire.

The firm has been active in the (re)insurance receivables market but has mainly focused on smaller value transactions. The new facility will allow R&Q to potentially deploy "tens of millions" of capital over the next few years if the right large value opportunities become available.

"We are not going to have capital sitting there. Our partner has given us a pledge to invest a certain amount of capital in that area and then that will be deployed as and when opportunities arise," Booth added.

Under the inchoate terms of the agreement, R&Q would retain around 10 to 20 percent of risk while its partner would be responsible for 80 to 90 percent.

Booth said R&Q would probably look to sell on a couple of its latest acquisitions on the receivables side, because a few recent large transactions had unbalanced its portfolio somewhat. Selling on a chunk of these would allow the firm to kick-start its new acquisition pipeline, Booth explained.

Concurrently, R&Q has been exercising its authorised share buyback programme and has repurchased close to 5 million shares for a sum believed to be around £6mn in total.

It is understood the firm has almost completed its targeted amount and will end its purchases shortly.

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