Stone Point has added yet another firm to its growing portfolio of workers’ comp assets; when the deal closes in a few weeks, Mitchell will join previous acquisitions Genex, AmTrust, and Sedgwick (the latter two have co-investors).
(I mis-read the press release this am – Elliott, a hedge fund with $34 billion under management is EXITING Mitchell.)
One of – if not the – investment firm(s) with the most experience in the work comp space, Stone Point’s been busy. It just completed the acquisition of bill review and case management company Genex. As I wrote in February when that deal was announced:
“I’d also expect some much bigger acquisitions. I don’t think Stone Point bought Genex to get into the case management and bill review business; these folks have bigger plans.”
Mitchell fits that definition…I’m speculating the price was well more than double Genex’. KKR bought Mitchell for $1.1 billion a bit over 4.5 years. When Mitchell’s “book” was out about a year ago, word was KKR wanted to double their money.
According to internal sources, Genex and Mitchell will NOT be combined or integrated or even work together. They were pretty adamant about that.
Allow me just a bit of skepticism; private equity (PE) firms don’t often buy companies with similar capabilities and services and leave them alone. That’s inefficient: they own two separate entities – overhead, management, systems, staff, and all – that do the same thing. Especially when those two businesses are aligned as closely in many areas as these two are.
While Mitchell also operates the nation’s third-largest work comp pharmacy benefit manager, and provides a wealth of services to the auto claims industry, Genex’ offerings sort of “fit in” to Mitchell’s portfolio. Genex’ utilization management, peer review, case management, and related offerings are very similar to Mitchell’s. And, Mitchell provides Genex’ bill review application.
Sources indicate there’s a lot of leverage (debt) on the Genex deal – as there is in pretty much every acquisition – so cost-saving moves and elimination of redundant functions is likely a priority.
It is certainly possibly the two companies will operate completely independently – but I’d be surprised if that lasts very long.
Couple related points.
Mitchell’s Alex Sun and his team are smart and savvy. There’s sort of a California tech vibe at Mitchell, an impression that is in contrast to the more traditional, operational focus of Genex. There are few people in this business I like or respect more than Genex CEO Peter Madeja; he’s well-regarded and well liked by all, especially by his co-workers. Point being, there are different cultures here, and this might be a, if not the, reason Stone Point may not want to move some pieces around.
The team that runs Stone Point’s P&C operation is extremely knowledgeable, well-respected and highly regarded for their experience and expertise in the comp industry.
Most of all, they are strategic.
They most certainly have a plan, and the Mitchell acquisition is one part – albeit a very large one – of that plan.
What does this mean for you?
More consolidation in a very mature industry. If you haven’t figured out where you want to be and how you’re going to get there, get busy.