Investors at a top middle-market private equity firm were looking to acquire 15 warranty and specialty risk business units from a large insurance company, creating a more focused independent business. Ultimately, the new company would go on to acquire four additional businesses, posing the massive challenge of integrating 19 separate organizations. The private equity sponsor teamed up with FCM to convert the organization from a holding company of separate entities to an operating company with centralized functional services, increasing its agility and profitability.

Approach

Transaction Support

We helped build a foundation for the carve-out’s success by playing a significant role in the acquisition transaction. Our team kicked off due diligence by identifying missing resource costs and overstated synergies in the deal financials, which materially altered the asset price. We also calculated the one-time and recurring standalone run costs of changing the company’s structure, and identified post-acquisition synergy opportunities to inform the private equity sponsor’s investment thesis. During the Sign to Close phase, FCM provided direction and oversight to prepare for Day One of the transition, leading Transition Service Agreement (TSA) negotiations with the seller and selecting the company’s new Financial and HR Information System platform.

Separation

Following a successful deal closing, FCM launched a staged separation plan to get the 15 combined initial acquisitions running at full speed as an independent company. It was critically important to exit all TSAs on time, in order to both eliminate fees the company was paying to use its seller’s infrastructure and to provide the business with flexibility and independence. We set up a transition governance structure and led the exit activities, including creating a shared services IT organization that leveraged both internal resources and third-party partners. Within just seven months, the business had fully implemented its new Financial and HR Information System and, within nine months, all 15 offices had converted to the new infrastructure (network, PC image, email and telephony).

Productivity

Simultaneously, FCM helped the new company realize synergies from the combination of multiple businesses, offices and teams. We implemented a best-in-class organizational design that streamlined overall compensation and benefits expenses in the company’s first 100 days. Within six months, this reduced payroll cost by 15% while improving decision making and service levels. We also helped plan four subsequent acquisition integrations, bringing the total to 19 combined entities within one new business. Additionally, FCM provided an experienced interim Chief Information Officer (CIO) and Chief Operating Officer (COO) to lead the business; helped hire and transition permanent leaders; consolidated offices to create a central hub for a key business unit; defined an interaction model for the Commercial and Operations teams; found automation and efficiency opportunities; and supported execution of the company’s first employee engagement survey.

Impact

$100M

IN DEAL SAVINGS FROM
DUE DILIGENCE

$280M

OF ENTERPRISE
VALUE CREATED

55%

OF TSAs EXITED IN
THE FIRST 16 MONTHS

More than halfway through its transformation, the new portfolio company is building substantial value for its employees and investors. We’re delighted to be a key partner in creating this industry-leading business with the fuel for long-term profitable growth.