Montagu Private Equity and Astorg Partners are planning to put their UK insurance software investments up for sale, hoping to entice insurers and fellow private capital groups with their technology.
Montagu is considering selling Open GI, which provides software for insurance brokers to conduct their operations, in a deal worth several hundred million pounds, according to five persons familiar with the situation.
According to insiders, the sponsor has been working with consultants on a strategic evaluation of the business in preparation for a formal sale as soon as the second quarter of the year.
According to three sources, London-based rival Acturis, which is minority-owned by Astorg, is also preparing for a sale, which may begin in late 2023.
Montagu did not respond. Requests for comment were not returned by Acturis, Astorg, or Open GI.
Long before a new generation of so-called ‘InsurTech’ companies emerged in the second part of the last decade with the goal of displacing existing insurers, private equity funds were investing in insurance IT suppliers.
In January, Vista Equity Partners agreed to buy Duck Creek Technology for $2.6 billion, indicating investor interest in the area.
Some, like Montagu, are now attempting to monetize their investments after overhauling the technological stacks of their portfolio companies.
Montagu participated in a management buyout of UK-based Open GI in 2014, after previously owning and selling the company to insurance broker Towergate in 2007.
It last tried to sell the business in 2018 and has since worked to restructure it into a software-as-a-service (SaaS) platform that may attract other private equity funds with previous assets in the insurance industry, according to sources.
In 2019, Astorg paid an unknown sum for a minority investment in employee-owned Acturis.
According to two sources, Open GI might be valued up to 12 times its estimated core earnings of more than 30 million pounds ($35.96 million) in 2023.
Meanwhile, they believe Acturis might trade at a premium due to its better profitability and growth prospects.
According to Reuters’ calculations, Open GI earned roughly 25 million pounds before interest, tax, depreciation, and amortization (EBITDA) for the fiscal year ending May 31, 2022, somewhat less than the previous fiscal year after accounting for unusual charges.
Nevertheless, Acturis produced EBITDA of more than 60 million pounds in the fiscal year ending September 30, 2021, according to Reuters calculations based on the most recent available data.
Sales increased from 102.4 million pounds the previous year to 111.9 million pounds as the company recruited additional brokers and insurers to its eponymous SaaS platform.