Risk International ‘buys’ a partner
Sale to BV Investment will fuel aggressive growth plan
Who: Risk International
What: Sold a majority stake to Boston-based BV Investment Partners to fuel growth strategy.
Why it matters: Firm leadership is confident they now have the tools to take risk and benefits management to a new level of excellence.
Dave O’Brien is ready to put Risk International’s ambitious growth strategy into overdrive.
He closed a deal last month with Boston-based BV Investment Partners that he expects will triple the size of the Fairlawn-based company over the next three to five years. O’Brien and his leadership team have their eyes on a massive market opportunity of more than $3 billion in the outsourced risk management services sector that can now be exploited with the counsel and financial support of BV.
“We have grown fivefold over the last six years with no formal sales and marketing operation whatsoever,” says O’Brien, the company’s chairman. “BV has worked with companies in professional services, financial services and the insurance industry to help them think through and develop a sales and marketing strategy. They have been there, done that.”
It was about a year ago when O’Brien, Vice Chairman Michael Davis, CEO Todd Miller and the team took stock of the company’s future and decided to explore the market for potential investors who might be interested in the business.
“We thought we had potential,” O’Brien says. “What we wanted to know was, is there a partner that we believe could make us better and help us realize our potential faster and more realistically?”
In this Deal of the Week feature, O’Brien takes us inside his approach to searching for investors and explains how he was able to execute the process seamlessly.
Keep your options open
The first thing you need to know about O’Brien’s approach to making a deal is how comfortable he was with going through the process and not making any kind of deal at all.
“We said we’re going to go see what the market is and see if there is a partner that could help us,” O’Brien says. “One of our options could have been to not do anything. This was not a situation where we said, ‘We’re going to go do a transaction.’ Our intent was to see what was available and let some people look under the hood, understand us better and challenge us a little bit too. We were going to learn a lot, we knew that. We were open to looking at all of our options. And one of those options was to keep plowing forward in the successful way that we were. It’s not like we were locked into doing a deal once we started the process. That’s something we all agreed to.”
Risk International is an independent firm that generates billions of dollars in shareholder value for its clients each year. The company specializes in outsourced risk management, as well as employee benefits advisory and information services for Fortune 500 and upper middle-market companies.
“We are a very unique player in that we are completely independent of the insurance industry,” says O’Brien, who previously served as president of Cleveland-based insurance broker Oswald Companies. “We don’t make any revenue from the insurance industry.”
In recent years, the company acquired an actuarial firm and started an employee benefits consulting business to broaden its scope from solely large-market clients to middle-market clients as well.
“We’ve demonstrated the ability to grow the business organically, identify acquisitions and broaden our services and just start new business ventures, which have all been successful,” O’Brien says.
The next step was to look at potential investors.
Set up checkpoints
A very detailed strategic process was followed before O’Brien kicked off the go-to-market initiative. He wanted to get feedback from investment bankers and PE firms to cover the available options. Risk International was willing to consider either a minority or majority investment, a leveraged recapitalization, a strategic sale or no deal. Then they began meeting with potential investors. Interested parties would need to pass through a series of gateways if they wanted to get to the negotiation phase.
“The first gate was the mission, the culture and style of the parties,” O’Brien says. “That was No. 1. If we couldn’t get past that and we didn’t see great alignment with that, we wouldn’t have made it to gate two. Gate two was: Can the potential investor be a value-added partner to our business and more than just a source of capital? That’s where I said we were the buyer. I’m buying their experience, expertise, track record, history, networks and all these things to be of value to what we’re doing. If we got past that second gate, then we go to the third gate: Can we get the right valuation and deal structure in place?”
It’s an interesting approach that O’Brien took, viewing himself and his business as the buyer, even though they were soliciting potential offers to buy a stake in Risk International.
“We were buying a partner,” O’Brien says. “We were trying to find the right partner with the right fit, who could truly bring value to the future of our business, not just write a check.”
The pathway to identify BV Investment Partners as the right firm to partner with had very few hiccups.
“We had done so much work together to build rapport and mutual understanding that we were able to work through issues as partners, not as parties on opposite sides of a deal,” O’Brien says. “We had spent time getting to know one another and we had common goals and interests. So when issues came up during the final phases of the deal, we were able to work through them together.”
O’Brien expects both the company’s revenue and head count, which now numbers 80 employees, to grow substantially in the next few years.
“We’re going to chisel a wheel that’s round, but they might help us laser cut that wheel a little faster with a greater likelihood of success,” O’Brien says. “They give us a source of capital as we look into other M&A opportunities to bring in. They have a lot of experience in the technology space and some ideas to utilize technology and data effectively in our business. They certainly have a great network to help us market the firm.”
How to reach: Risk International, www.riskinternational.com