Steel Burrill Jones
Transaction Background
In January 1999 Graphite Capital led the £21 million public-to-private management buy-out of Steel Burrill Jones (SBJ), a mid-sized UK-based insurance broker. SBJ's share price collapsed in the mid 1990s due to a general de-rating of the insurance broking sector and SBJ's poor performance. The business was in the process of changing its strategic focus but this had not yet been recognised by the public market. We secured the agreement of the management and then the support of the public shareholders to take the business private.
Deal Attractions
Graphite backed an experienced management team. The previous under-performance of the company was holding back SBJ's valuation and ability to grow. However, detailed analysis showed that the business was on an improving trend and that profits would increase quickly once the costs associated with being a plc were removed and the benefits of management action emerged. There was also the opportunity to sell subsidiary businesses to de-risk the investment and enhance returns post deal.
Achievements
- following the transaction two SBJ subsidiaries were sold in independent transactions to third parties for £12 million
- the sale of these two businesses enabled the group to repay 60 per cent of the initial purchase price for the entire company whilst reducing profit by just 11 per cent in 1999
- operating profit doubled during the period of our ownership
Exit
- the business was sold to its management team for £33.6 million in November 2001
- total proceeds from the investment were £29.0 million
- we achieved a multiple of 3.4 times our initial investment and an internal rate of return of 75.1 per cent