Gresham offers ‘a piece of the upside’ to firms looking to sell

Private equity house Gresham still has around £170m to invest and is waiting for companies to start selling off chunks of their business.

The firm has spoken to a variety of parties over the past year, including brokers, aggregators and business process outsourcers, but is yet to identify the right investment.

Gresham sold its 41% stake in Giles Insurance to private equity firm Charterhouse in March last year, and since then has been looking at similar opportunities.

Partner Simon Hemley believes insurers and large corporates will soon start divesting parts of their operations. This could open the way for an investment in a business providing a service to an insurer or possibly a broker owned by an insurer.

Hemley said: “I am surprised that insurers have not divested more assets already. Certainly the industry has felt pressures of a recessionary environment as claim levels increase and consumers are more price sensitive.

“Corporates and large insurers became more inward looking, but I would expect them to become more focused on the strategic development of their business and on identifying what areas are core and what areas are non-core. This should lead to more divestments.”

Gresham has developed a joint venture product that allows vendors to retain a stake in the business after the firm’s investment.

Hemley said: “One of the obstacles is that, while some of the larger corporates would like to get assets off their balance sheets, they fancy a piece of the upside if the business goes up in value in the future. These situations present interesting opportunities for Gresham.”

Hemley said the downturn had changed the dynamic between banks and private equity partners. “We have a very strong track record with banks, which are more focused than ever on finding the right equity partners. Back in 2007, it was more a case of deploying capital.

“Today, banks want to know that their equity partners have an established track record and that they are not going to misbehave if there was an investment and things did not go to plan.”