Portfolio divestments: How Oxbow Partners helps
August 21, 2016 Chris Sandilands
Oxbow Partners has helped a number of brokers divest non-core portfolios of policies in the last year. In this blog post we describe the role Oxbow Partners play in these transactions.
Why divest a portfolio?
There are many reasons why brokers divest portfolios.
The most common reason is that portfolios have been acquired and are non-strategic. Many brokers have grown by acquisition; each acquisition has targeted another broker’s specialism, but required the buyer to acquire non-strategic portfolios as part of the acquisition. For example, Marsh’s acquisition of Central Insurance Services in 2014 targeted CIS’s oil and gas business but included a specialty motor portfolio administered by a team of six in Kendall. This was subsequently divested to Principal Insurance shortly after the acquisition.
Other reasons include portfolios going ex-growth, portfolios requiring an owner with more automated processes, pressure from the regulator, or a change of strategy.
In most cases portfolios are attractive for the right buyer.
Why portfolio divestments are tricky
Portfolio divestments are tricky because they are asset sales rather than the sale of legal entities. This creates complexity for two reasons.
First, the separation is difficult. The relevant policies need to be identified and then transferred from the seller to the buyer. This invariably requires an overnight change of IT and team and cannot create any customer detriment. Customer messaging is critical and requires careful consideration of the transfer process in order not to unsettle customers.
Second, the diligence and transfer process is fraught with legal complexity. As data is being moved from one legal entity to another – often between competitors – there are data protection and competition issues on top of the usual commercial considerations. Employment law is also challenging as the seller must identify whether any employees have the right to transfer with the portfolio.
The complexity does not scale in line with deal size – even small deals require clients to manage all of the technical aspects in line with the law.
The Oxbow Partners role
Oxbow Partners helps clients manage these complex processes.
- Process management: We coordinate large teams of stakeholders for our clients. We prepare and run regular updates calls and ensure all parties are brought in as required. This includes managing signoff processes at all levels in the organisation during the process.
- Content convergence: We do not take a view on technical issues such as law, accounting and tax, but help clients answer these questions by managing internal stakeholders. We ensure the right people are involved at the right time, and “negotiate” with internal experts to build workable consensus positions that reflect both commercial objectives and the often conflicting requirements of the law and regulation, for agreement by the client.
- Sale preparation: We help clients manage the process to identify and shortlist buyers. We also source and prepare data, for example for teasers and due diligence. We normally require the client to extract data from systems but then ensure that this data is cleaned and cut so that it can be shared in diligence and at other points in the process.
- Due diligence: We are able to manage data rooms and coordinate the diligence process with buyers. We facilitate Q&A processes by helping our clients prepare answers.
- Execution: We act as an interface between our client and any external or internal counsel engaged in the contract drafting process to ensure that all parties are aware of the relevant facts.
- Transfer process design: It is critical to design a detailed transfer process to ensure no customer detriment occurs. We work with our client to design processes both to effect the transfer and for any run-off obligations where required.
- Stakeholder management: We help business leaders prepare documentation for Board sign off and other corporate oversight functions, e.g. risk committees.
Why Oxbow Partners
Having executed five of these transactions in the last 24 months, we believe that our team is uniquely well positioned to help clients with this kind of engagement.
For more information, please contact Chris Sandilands.
Please note that Oxbow Partners is not regulated by the Financial Conduct Agency and cannot provide services which are licensable in the UK or any other jurisdiction, in particular, offering advice on investments or arranging deals as defined in the UK’s Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
