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Open season on Lloyd’s for private equity

It appears to be open season for mergers and acquisitions in London as the prevailing soft market sends valuations low enough to alert the bargain hunters, but it looks as if the Lloyd’s (re)insurers are attracting a certain type of investor.

As this piece in The Insurance Insider says: “But if 2001 and before was for venture capitalists and 2006 and 2007 belonged to the hedge funds, then today it is the turn of the private equity (PE) investor.”

Yesterday saw the announcement that ICAT Holdings had been bought out by its management team, who are backed by PE cash.

The new entity is called Paraline Group and is backed by Wand Partners and Elliot Management Corporation. Its chairman and CEO Jack Graham has admitted that it maybe counterintuitive to launch a business during a soft market.

But Graham added that it is crucial to be present in the market to be able to “turn on the jets and take market share” when the timing is right.

This followed news that Hardy Underwriting had knocked back Beazley’s speculative offer for the company as it “substantially undervalues the company”. Admittedly, Beazley is a rival Lloyd’s insurer rather than a PE fund, but it is familiar territory as far as the haggling over valuation is concerned.

And all this is going on while private equity duo of Apollo and CVC are putting the finishing touches to an expected formal offer to Brit Insurance.

The PE consortium’s initial bid for Brit was 100p per share, valuing the firm at less than £800mn, but after two rejections it finally appears to be closing the deal with an offer a full £1 per share higher – boosting the value to over £870mn.

Finally, it would seem that Israeli investment house Clal is in advanced talks to acquire Jubilee Group.

But, who will catch the private equity eye next?

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