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MMC considers selling Kroll for heavy discount

Marsh parent Marsh & McLennan Companies (MMC) is poised to sell off Kroll, its underperforming corporate investigations division, for 30 percent less than it originally paid.

MMC will sell Kroll to one of a number of interested parties for around $1.3bn - a significant discount on its acquisition price of $1.9bn - according to The Financial Times.

Private equity firms the Carlyle Group, Apax Partners and General Atlantic are understood to be in the running, with a fourth private equity firm, BC Partners, also linked with a bid.

Jules Kroll, who founded the company in 1972 and remained at the helm until the end of 2008, is also mooted as a potential buyer.

MMC purchased Kroll in 2004 for a generous $1.9bn as Eliot Spitzer pursued Marsh over contingent commissions. The deal raised a few eyebrows in the business and prompted a flurry of speculation about the strategic motives for the transaction at a time when the global broker was facing the threat of a major fine following the scrutiny of the now-disgraced New York attorney general.

Indeed, some even speculated that the Kroll takeover may have been partly influenced by a desire not to have too much capital on its balance sheet. MMC eventually paid $850mn to settle the Spitzer allegations and form a restitution funds.

Even if this notion seems far-fetched, it certainly is clear that the investigations arm has never sat easily within MMC's other businesses.

In May 2008, following a failed BC Partners-backed takeover bid led by Kroll's former European chairman David Buchler, MMC chose to accept a $425mn goodwill write-down as it separated out the corporate advisory and restructuring operations.

Kroll was then slimmed down in November 2008 during a double management buyout where a large number of staff left to form restructuring business Zolfo Cooper Europe and turnaround firm Talbot Hughes McKillop.

However, problems persisted and last year Kroll's revenue fell 16 percent from $797mn to $667mn.

After six years MMC may finally be about to accept that Kroll is a poor fit and cut it loose.

Annual results released last month showed that Marsh's net income had fallen from $80mn in 2008 to $38mn in 2009, as it paid out $205mn net to settle two Spitzer-era class action lawsuits.

MMC declined to comment.


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