Talked with several folks in the industry about this deal, including Sedgwick CEO Dave North. Couple points worth highlighting.
This has nothing to do with Mitchell International and there will not be any combination of the companies.
For some reason a few folks are advancing the theory that there is some grand strategy at KKR involving buying up some/most/all work comp service firms (I exaggerate, I know) to build some Mega-Corp that will own the industry.
Please disabuse yourself of this notion. Of course, KKR sees work comp services/P&C services as an attractive market, but that does NOT mean they are looking to mush a bunch of disparate entities together. According to North, he “hasn’t had a word with anyone from Mitchell and there is nothing that is part of this deal that contemplates Mitchell as part of the scenario.”
I believe him.
As a side note, Stone Point (current owner of Sedgwick) owns/has owned several other work comp services businesses including Cunningham Lindsay and Genex. There was very little communication between these entities, and a lot of competition.
Moreover, investment companies aren’t monolithic; they manage different internal investment funds, with different outside investors in those funds. It is highly likely the investors in Mitchell are NOT the same as those buying into Sedgwick.
Sedgwick management is sticking around; many have also invested in the company going forward. That’s from several internal sources.
Finally, while management is staying, the same business model will be followed, and Sedgwick will remain Sedgwick, there will be changes – as North noted, “any time you have the backing of a company like KKR there should be opportunities for change that didn’t exist in the past.”
KKR is huge, has tremendous resources, and may well decide to deploy some of them to further enhance their new asset. But they certainly wouldn’t have bought Sedgwick with the assumption they would make big changes.
You don’t pay a multiple in the double digits for a company that needs major changes.