| Location |  |
|---|---|
| Date of investment | Jan 1994 |
| Activity | Life assurance |
| Investment Size | €11.5m |
| Type/stage | MBO / Buy and build |
| Revenues | €227.0m (1997) |
| Transaction Size | €40.6m |
| Milestone Board Members | |
| Date of realisation | Sept 1997 |
The Business
Stalwart Group was a UK market leader in the development of financial products for those in retirement. Its core product was a reversionary property annuity scheme which enabled "income poor/asset rich" elderly home owners to purchase an annuity with their residential property whilst maintaining a leasehold life interest. Demographic trends pointed to strong market growth in this sector despite difficult regulatory market conditions, brought about by poor selling of inappropriate "equity release" products by other providers. Prior to our investment, Stalwart had an excellent reputation, a leading market share and was available at an attractive price, but had problems with its funding structure.
The Management
Mike Fuller, chief executive, who led the MBO, had been with Stalwart for a number of years and understood the product and the market place very well. Once the major constraints of funding the growth of the business had been solved through our involvement, Mike, over the next three years, put in place a first class management team. This included Mike Girling, Sales Director, whom he recruited from a senior sales position at Commercial Union, and Gay Welch, Legal and Compliance Director, who had previously been Company Secretary of Standard and Chartered Banking Group.
Strategic Development
Having acquired the business, we arranged and secured a substantial line of reinsurance funding from a leading German reinsurer. Shortly afterwards we also arranged for a leading German bank to provide innovative, non-recourse, long term loan finance against the company’s existing portfolio of reversionary property interests. With substantially improved liquidity, Stalwart rapidly grew its sales from approximately £5m per annum in 1994 to approximately £150m in 1997, at the same time as increasing its direct sales staff from three to 25 and investing substantially in television advertising. In 1997, Stalwart enjoyed a dominant market share of some 70%. In September of that year the business was sold to a subsidiary of GE Capital, generating a money multiple return in excess of 3 times on our original investment.