CFC has signed a deal with private equity houses EQT and Vitruvian for a minority stake which will see the MGA valued at north of £2.5bn ($3.5bn), Insurance Insider can reveal.
Sources said that the marketing Ebitda for the business was in the range of £60mn, which would equate to a multiple in excess of 40x – a record-breaking figure for an MGA business.
The deal sees Vitruvian reinvest in the business after it first bought a 40% stake in CFC in 2017. At the time, the deal valued the business at £230mn, equivalent to just over 15x forward Ebitda.
It is understood that after a frenzied round of first round bids, the Evercore-led process was cut short following a pre-emptive final bid. The deal is being financed upfront entirely with equity.
CFC management and staff retain a majority holding in the business.
The sky-high multiple is said to be driven by the high-growth profile of CFC, a business which has seen 35% compound annual growth in earnings over the last five years and is benefitting from a rating tailwind, particularly in its core cyber line.
Sources said the forecast Ebitda for the financial year ahead is in the region of £80mn.
Bidders are also likely to be attracted by the scalability of the CFC model, which has a unique and vast distribution network.
Sources have suggested that the multiple – which is around 3x as high as insurance industry benchmarks – also reflects the perception of some bidders that CFC’s tech capabilities make it as much a technology as an insurance play.
CFC, led by group CEO and founder David Walsh, is one of the largest and most successful MGA businesses in the London market. It runs a portfolio of 12 other specialty lines alongside its specialism in cyber, for which it is well renowned.
It has invested heavily in its own proprietary systems and platforms to improve service and efficiency, with the business perceived by some investors as a crossover between traditional insurance and tech.
The MGA launched a Lloyd’s syndicate in the summer as a vehicle to take some of its own risk and bring low-cost capital to back its underwriting. Ontario Teachers’ Pension Plan and ILS fund Stone Ridge Asset Management are two of the third-party investors providing Funds at Lloyd’s capital behind Syndicate 1988, alongside traditional reinsurers.
EQT and CFC declined to comment. Vitruvian was contacted for comment.
