Ed Broking continues to hold discussions with prospective buyers, CEO Steve Hearn said, as current majority-owner Lightyear Capital LLC's exit nears. But the company has not entered into a formal sale process, and Lightyear is "not in any hurry" to sell the U.K.-based specialist wholesale and reinsurance broker, Hearn added.
Speaking to S&P Global Market Intelligence in an interview at the Monte Carlo reinsurance Rendez-vous, Hearn said: "I've had a lot of people knock on the door."
The Insurance Insider reported in July that Warburg Pincus was among private equity firms looking at buying Ed, formerly known as Cooper Gay Swett & Crawford. Hearn said: "Some of the press speculation has been right. Big PE firms are starting to understand [the] organization and what it might offer them. We continue to talk to those people."
He added: "I'm not here to announce that we are getting bought, or even in a process. But it will happen. There is a lot of opportunity out there. We have done a good job creating a business that is investable, and we are excited about some of the conversations we are having."
Hearn declined to put a time frame on the sale process. Lightyear has owned its controlling stake in Ed for almost six years, having completed the transaction in January 2013. Private equity houses typically hold investments for about five to seven years.
Road to profitability
When Hearn took over as CEO of Ed in November 2015, the company — still under its old name — was loss-making, shrinking and in the midst of a turnaround. Hearn said that by the end of September, Ed will have achieved four consecutive quarters of revenue growth, and he expects the company to break even in 2018 as a whole, despite hiring a further 80 people during the year.
He said that over time, a wholesale specialist broker like Ed should be reporting profit margins in the low 20s. He added: "We are a year or two away from that because we want to keep investing in the organization."
The improved financial position is helping attract interest from buyers, Hearn said. "Having four quarters of growth in a row is helpful. The story is supported by the metrics of the business now."
As well as talking to potential buyers, Ed is looking at making its own acquisitions. Hearn is keen for Ed to have a Bermuda presence, and he said press reports that the company had been looking at potential acquisitions in the London market were "accurate."
But he added: "I haven't found anything where the price and fit makes sense for us to do it. We will definitely continue to look."