Blog: It’s Simply Business as Markerstudy finally lands Brightside

The news that Markerstudy has acquired Brightside again proves the old adage that if at first you don’t succeed try and try again. Even if takes over seven years.

Having flirted with the Bristol-based personal lines broker throughout 2013, Markerstudy eventually saw Brightside sold for £127m in May 2014 to private equity house Anacap, who must have been thinking this insurance game is pretty good having backed the MBO of Simply Business 10 months earlier.

However, never have the paths of two investments probably diverted as much Simply Business and Brightside.

Because whilst Anacap sold Simply Business to Aquiline for a return of 4.2x its initial investment in April 2016, it has been left holding Brightside until now as the broker lurched from one problem to the next. Indeed Simply Business was sold again on an upward trajectory for a tidy profit to Travelers in May 2017 very much at odds with the direction of its former sister portfolio company.

In the three years Anacap owned Simply Business it reported revenues grew by 75%, with double digit growth in new business policies and greatly improved renewal rates (close to 80%), while Ebitda jumped fivefold, benefitting from operating leverage.

Challenge
Within 12 months of owning Brightside Anacap soon woke up to the fact that this investment was going to be a lot more challenging as it experienced a 22% fall in revenue to £69.5m as group Ebitda halved to £9.1m and policy sales numbers tumbled.

Initially, things did look, well, bright for Brightside as the business brought in Mark Cliff from Ageas as chairman and Andrew Wallin from Gallagher as CEO in 2015. Indeed the talk was about growth and acquisitions with Autonet understood very much to be on its radar.

However, that light started to dim as Wallin, who only joined in January, left the business within nine months as the strategy focus turned internal rather external with M&A cast to the side as it shaped to get its house in order.

In the intervening years Cliff left the business, replaced by former Axa UK boss Brendan McCafferty; it tried to diversify with a managing general agent Kitsune, that after a delayed launch was canned in November 2020; and although the business had stabilised its losses it was no longer the organisation that Markerstudy had pursued in 2013.

Failed deal
In 2013’s protracted will they or won’t they dalliance with Brightside, Markerstudy made a preliminary approach to buy Brightside Group for £123m at 27p a share in July, cutting it to 20-22p per share valuing the company at £100m in September.

Having asked for an extension to pursue the deal, Brightside rejected Markerstudy’s revised offer as “fundamentally” undervaluing the broker, adding that the commercial interests of Brightside had been “increasingly damaged” by the length of the current offer period having already “reluctantly” extended the offer period once.

In Markerstudy’s call for an extension it had demanded clarity over a number of issues including the “future strategic direction” of the business and it appears evident that it might have a blessing in disguise not to seal the deal when it originally wanted, even at the reduced offer.  

When Insurance Age spoke to Gary Humphreys, pictured above, Markerstudy group underwriting director two years later in November 2016, he confirmed that the provider had been in “informal talks” with Brightside owner Anacap, adding: “We’re always interested in any acquisition if it’s a business we feel we can do something with. At the time we thought our price was right and we were out-bid. If it [Brightside] came back on the market at the right price then we might well be interested again.”

Price
Although the amount Markerstudy paid for Brightside this month has not been revealed, one suspect it is certainly no more than half and probably closer to a third of its original offer.

Commenting on the deal Kevin Spencer, Markerstudy group CEO, said: “We were in the running for Brightside seven years ago but lost out to Anacap. In the intervening years we’ve observed the business with interest and developed an excellent working relationship with the team.”

He might have lost out in 2014, but today he will certainly feel like the winner. Playing the long game has certainly paid dividends for Spencer and Markerstudy. For Anacap the write down on Brightside will likely be put in the box labelled ‘simply business’, and they’ll move on.

Jonathan Swift is content director for Insurance Age and Post.