Direct Group in management buy-out

The management of Direct Group has acquired the business in a £40m deal with the backing of mid-market private equity firm LDC.

Based at sites in Doncaster and Halifax, Direct Group, a provider of corporate and affinity services to the insurance sector, provides a range of value-added services to insurers and corporate partners, including policy administration and fulfilment, commission management, premium collection, claims handling and performance reporting.

The business works across the product sectors of property, motor, life and casualty, focusing predominantly on property and protection insurance schemes.

In the past year, the Direct Group team has evolved from a niche third party administrator to that of a broader ‘managing general agent’ working as an intermediary for both insurers as well as corporate and affinity distributors.

LDC has invested £21.3m for a significant minority shareholding, with the balance of equity held by first and second tier management teams.

Debt funding was provided by Barclays Leveraged Finance team in Manchester.

As part of the deal, Ray Stenton, investment director at LDC, will join the board as non-executive director.

Stenton commented: “The business has a very flexible technology platform. This enables providers – such as lenders and underwriters - to work with Direct Group to develop tailored products for its distributor partners and use its technology to deliver new products and services to the marketplace quickly and effectively.”

Stenton added: “There are a number of strengths to Direct Group. We’ve been hugely impressed by its operational efficiency, which is driven by a highly automated IT infrastructure enabling the business to provide an unparalleled quality of service to its clients. It has also successfully evolved into an added-value partner providing a wide range of services across a diverse range of product areas, enjoying excellent relationships with insurers and distributors.

"Add to that an excellent management team led by Derek Coles and Scott Hough, we believe the business is well placed to capitalise fully on a dynamic marketplace that is seeing rising demand for partners like Direct Group.”

Coles, who becomes chief executive of Direct Group, said: “The company has delivered added value products to the insurance market for 17 years, and continues to grow rapidly.

"This deal however is a transformational for everyone at Direct Group. LDC is the ideal partner to help us deliver our future growth plans for the business. Very early on, Ray and his team demonstrated the same passion that has propelled us onwards over the last few years.

"We enjoy a high level of credibility in the insurance market – securing the backing of an investor like LDC can only enhance that. This new investment is a key step in enabling us to continue developing our technology and business platform to deliver sustainable income for our customers”.