1. PRESENTED BY
Private Equity Focuses on Financials
and a Trusted BPO Partner
Does the Rest:
A Proven Mantra for Business Profitability
A Conversation with VIK RENJEN
In partnership with

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2
PRESENTED BY
Private Equity Focuses on Financials and
a Trusted BPO Partner Does the Rest:
A Proven Mantra for Business Profitability
Private equity firms are as busy today as they have ever been. Almost 3,000
U.S.-based investments closed last year totaling $522.6 billion in value, according
to Pitchbook Data.
What’s more, going forward dealmakers expect private equity transactions in
financial services, insurance and real estate (FIRE) deals to be plentiful, according
to the latest reading of SourceMedia’s Mid-Market Pulse (MMP)1
.
Dealmakers polled at the end of 2014 expect M&A to expand significantly in
the FIRE sector in 2015. FIRE’s 12-month score of 87.2 surpassed the overall
index score of 69.7. The sector score also was the highest 12-month score of
the six fast-growth industries measured by the MMP.
Insurance in particular is one of the reasons FIRE is a hot sector. Top private
equity firms such as Apollo Global Management, Ares Private Equity Group,
KKR, The Blackstone Group and The Carlyle Group have all made investments
in insurance companies recently. In the past two years, there have been around
30 private equity deals completed primarily in the insurance sector, according
to Thompson One Banker.
Private Equity Shows Interest in Insurance
Private equity firms are zeroing in on the insurance sector because insurers need
capital. With low interest rates profit margins have been squeezed, which has in
turn required insurers to inject more capital into their businesses or risk being
downgraded. Compounding this issue, newer, more stringent regulations are
making it more difficult for traditional banks to deploy fresh capital in the insurance
market leaving the door wide open for private equity firms to enter. Private
equity firms like the investment opportunity because insurance firms offer the
perfect blend of safety, predictable returns and growth potential.
“There’s no question that private equity firms are becoming increasingly interested
in the insurance assets due to predictable returns and the availability of cheap
capital. There is liquidity in the market and their book values are not fully mon-
etized,” says Vik Renjen, Senior Vice President and Global Head of Banking,
Financial Services and Insurance at Sutherland Global Services. “Private equity’s
push into the insurance sector makes sense and will only become greater.”
There has been a slew of global private equity transactions in the insurance
sector completed recently. For example, in 2014, New York-based KKR bought
Sedgwick Claims Management from Stone Point and Hellman & Friedman in a
$2.4 billion deal. Additionally, European private equity firm AnaCap Financial
Partners completed the acquisitions of Brightside Group, a U.K. insurance
broker, and AssurOne, a French insurance broker. On the retail brokerage side
of the insurance space, private equity firms have been trying to emulate the
model established by AssuredPartners Inc. in Lake Mary, Florida, with the idea
of combining enough smaller brokerages to create a national platform that one
day can be taken public. AssuredPartners, backed by Chicago-based private
equity firm GTCR, has made more than 75 acquisitions since launching in 2011,
including more than 20 in 2014.
Dealmakers expect
private equity
transactions in financial
services, insurance and
real estate to expand
significantly over the
next 12 months1
“There’s no question
that private equity
firms are becoming
increasingly interested
in the insurance assets
due to predictable
returns and the
availability of cheap
capital”– Vik Renjen
1
The MMP, published by Mergers & Acquisitions, in partnership with McGladrey, LLC. is a forward-looking
sentiment indicator that monitors near-and intermediate-term outlook for merger and acquisition activity
within the middle market.
Danielle Fugazy
Contributor,
American Banker
Vik Renjen
Senior Vice President
and Global Head of
Banking, Financial
Services and Insurance
Sutherland
Global Services

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PRESENTED BY
Private Equity Focuses on Financials and
a Trusted BPO Partner Does the Rest:
A Proven Mantra for Business Profitability
With its sticky customer base, reoccurring revenue streams and growth potential
it certainly does make sense for private equity firms to get in on the action.
However, generating returns from insurance investments is not an easy task.
Insurance is a very nuanced business and margins can be tight. “It takes very
strong industry knowledge to grow insurance businesses correctly and generate
the type of returns that private equity firms need to produce for their limited
partners,” says Renjen.
BPO companies can help
The good news is there’s no need for private equity firms to go at it alone.
Experienced Business Processing Outsourcing (BPO) companies like Sutherland
Global Services can provide the solution by helping private equity firms interested
in investing in the insurance sector produce solid returns for their investors.
“Private equity firms need to focus on fund generation and optimizing the
financials of their portfolio companies. A BPO company can partner with private
equity firms, taking on the non-core operational tasks that are time consuming,
repeatable and complex, thus, freeing private equity firms up to focus on their
core deliverables,” says Renjen.
A qualified BPO company can add value from the beginning to the end of the
investment process. First, a good BPO company can identify and perform due
diligence on potential insurance acquisition targets on demand, cheaper and
faster than a private equity firm could do on their own. It’s important to partner
with a BPO company that already has sector knowledge. With so many intricacies
that come with investing in insurance companies private equity firms need to
be sure that they are paying the right price for an asset and getting exactly
what they paid for. Only a BPO company with prior experience in the insurance
sector is able to make those determinations.
“With tight margins one mistake can blow a private equity firm’s investment
thesis and with it diminish its return prospects. Conducting stellar due diligence
is critical,” says Renjen. “In addition to finding all the company’s good and bad
attributes, Sutherland is able to highlight, almost immediately, where the value
lies and how to unlock it.”
Of course this process needs to be undertaken with specific criteria developed
in consultation with the private equity fund manager. During due diligence
process, a qualified BPO company should perform a detailed business valuation
of the target company with a review of the value chain, operations and financial
parameters. Getting a detailed financial model with revenue and operating
drivers is a plus. In addition to looking at the company’s financials, a worthwhile
BPO partner should assess the company’s market attractiveness by conducting
a detailed competitive landscape analysis including checks on the company’s
suppliers, customers and market trends and risks.
Experienced BPO
companies can help
private equity firms
produce solid returns
for their investors,
adding value from the
beginning to the end of
the investment process
“A BPO company can
partner with private
equity firms, taking
on the non-core
operational tasks
that are time consuming,
repeatable and complex,
freeing private equity
firms up to focus on
their core deliverables.”
– Vik Renjen

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PRESENTED BY
Private Equity Focuses on Financials and
a Trusted BPO Partner Does the Rest:
A Proven Mantra for Business Profitability
Once a private equity firm completes the investment transaction, a strong BPO
partner can most likely save the insurance asset’s operating costs or increase
its’ revenue stream. For example, Sutherland has been saving in excess of 30%
in operational costs for the portfolio companies of private equity firms says
Renjen. However, it’s important to note, that while saving is great, using a BPO’s
services is more than a cost-cutting tool, it’s a means of delivering higher-quality
services and capabilities as well as augmenting the Revenue stream. Private
equity firms want to be sure to work with a company that offers its customers
transformational value by deploying sophisticated computing, analytics and
software automation in addition to expert human capital.
BPO Provides Operational Efficiencies
One of the most important things a BPO provider should do is improve operational
efficiency and rationalize investments in multiple systems and redundant processes.
BPO partners, engrained in the insurance industry, should have greater economies
of scale and operational expertise than a standalone insurance company thus
making their processing more economical. Receiving analytics support for
benchmarking performance across marketing and operations and evaluating
sentiment across the entire value-chain, including stakeholders, investors and
customers is also of great value to private equity firms. It’s important that private
equity firms are sure the BPO partner they are working with has the ability and
a proven track record to provide these things.
What’s more, instead of PE companies unnecessarily employing full-time
professionals to conduct research or do a cost analysis, the BPO partner should
be able to take these tasks on. Knowledgeable professionals who have deep
expertise in the sector and are used to conducting market and sector research
as well as analysis should be at the helm so there’s no need to worry about
quality control. In fact, a BPO partner will most likely have more breadth of
experience due to a multi-faceted exposure in the space than someone in a
standalone PE firm.
“Pooling resources is very effective and because we work with so many insurance
companies we employ professionals to perform certain useful business functions
that insurance companies need, but don’t necessarily need all the time, which
makes it inefficient for insurance companies to staff these people full-time,”
says Renjen.
Portfolio management and monitoring is another huge undertaking that private
equity firms investing in insurance companies may need help with. “Having an
additional set of eyes on your investments is a huge bonus. It’s extremely
helpful when your Business Process Outsourcing (BPO) partner has very solid
strategies to help your portfolio companies reach their goals during our ownership.
Many can deliver on the processes, but very few companies like Sutherland Global
Services have business transformational ideas to push a portfolio company to the
next level. It’s important to partner with a BPO partner that brings domain,
infrastructure and innovation,” says Andreas Schulte, Operating Executive,
Marlin Equity Partners.
The ability to leverage professionals in various geographies and provide reporting
and portfolio monitoring is also important.
It’s important that
private equity firms are
sure the BPO partner
they are working with
has the ability and a
proven track record
“Pooling resources
is very effective and
because we work with
so many insurance
companies, we employ
professionals to
perform certain useful
business functions that
insurance companies
need, but don’t
necessarily need all the
time,” says Renjen.

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5
PRESENTED BY
Private Equity Focuses on Financials and
a Trusted BPO Partner Does the Rest:
A Proven Mantra for Business Profitability
“It’s imperative that private equity firms are able to act swiftly if something has
gone sideways at a portfolio company. We are much more likely to engage with
a BPO partner that is astute at proactively picking up on the slightest operational
issues and making sure they are righted before they even become problems,”
Carlos Oliveras , CEO, Kane USA.
Leveraging different geographies that provide niche operational advantage is
also of upmost importance. While any BPO provider can probably reduce costs
by outsourcing certain functions, overseas outsourcing is not always the right
answer. According to Harry Moser, founder of the Reshoring Initiative, about
25 percent of the jobs that were outsourced over the last 20 years will return to
the U.S. or near shore to the U.S. because outsourcing didn’t make sense.
“We call it right sourcing. We do move some functions overseas if labor arbitrage
can reduce costs, but that’s not always the case. We pick the best locations for
our clients’ need and deploy based on that,” says Renjen. “There are no absolutes
for any clients. All our solutions are designed around each clients’ specific
needs. Sometimes it makes sense to be in the U.S. other times it does not.”
Once the private equity firm has executed on its strategy of increasing the
valuation multiple of its insurance portfolio company, a good BPO partner
is able to finally help private equity firms find the right exit opportunity. As
opposed to just taking growth and the hold time into account, a BPO partner
should be able to help private equity firms develop a suitable exit strategy
based on market timings, the best divestment route including an IPO or sale to
a strategic acquirer. What’s more, the more engrained the BPO partner is within the
insurance industry the more likely it is to help find the right buyer because they
will have insight as to whether any strategic acquirers are interested in the asset
quicker than a private equity firm may find on its own or with an investment banker.
“We like to think of our relationship with private equity firms as a partnership
between us, the private equity firms and the insurance companies. We focus
on the non-core—but extremely important—work that needs to get done so
private equity firms can focus on generating alpha and insurance companies
can focus on their customers. We are the operational guys and we can deliver
real measurable enterprise value from the very beginning until the very end,
basically soup to nuts. This makes it a truly and tested Win –Win proposition
for the PE Firm, their Insurance Asset as well as the BPO partner” says Renjen
CONTACT:
To reach out to Vik Renjen, call 585-662-7402 or email:
Vikram.Renjen@SutherlandGlobal.com
VISIT OUR WEBSITE AT:
www.americanbanker.com
www.sutherlandglobal.com
Six categories of Private Equity
related activities that can be
leveraged using the services of a
knowledge based BPO partner.
These are the foundation for
successfully initiating, managing
and sustaining PE investments:
1. Identify Fund Opportunities
2. Investment: Identification
and Evaluation
3. Optimizing Portfolio Company
Performance to Increase
Fund Alpha
4. Portfolio Monitoring and
Management
5. Manage Investor Relations
6. Exit Strategy Support
– Excerpted from an interview with Vik Renjen,
originally published in Forbes, March 20, 2015