US buyout group KKR is buying a 50 per cent stake in Soderberg & Partners, the biggest independent pension adviser and non-life insurance broker in the Nordics, in a deal that values the company at about $1bn.
Founded in 2004, the company advises companies and individuals on how to invest their pension savings. It has around 2,000 employees and more than 100 offices in its core markets of Sweden, Denmark, Norway and Finland.
KKR is buying most of the stake from TA Associates, the US private equity group that became a minority shareholder in 2014, and from former employees, two people with direct knowledge of the transaction said. The remaining stake will be held by founders Gustaf Rentzhog and Per-Olof Soderberg and a number of smaller shareholders.
The new owners will grow the company through acquisitions of smaller players in Sweden, Denmark, Norway and the Netherlands in a highly fragmented industry.
â€śKKR has a lot of firepower and thatâ€™s important for acquisitions,â€ť said Mr Rentzhog in an interview.
Soderberg, which is also the Nordic regionâ€™s largest independent wealth manager, has been growing operating profits by 20 per cent in recent years, according to a person with direct knowledge of its finances.
Executives at KKR are counting on further consolidation of the industry as well as growing demand from both companies and individuals as pension schemes shift from defined benefit to defined contribution pension schemes.
Mr Rentzhog said employees needed help with their pensions but added that â€śmost markets are under-developed when it comes to helping the individuals on how to investâ€ť.
He added: â€śIt is a huge problem because when companies change the system they donâ€™t introduce advice in a corporate way and people end up making the wrong decision on funds and assets but they still carry the risk.â€ť
In securing the stake, the UK private equity group pre-empted the auction and beat interest from local European players, including EQT, Permira, Bridgepoint and Nordic Capital, people close to the process said.
An announcement is expected as early as Friday morning in London.
Insurance broking has been a happy hunting ground for private equity in the past. KKR itself owns an stake â€” alongside Highbridge and Madison Dearborn â€” in Ardonagh, a large UK based insurance broker. KKR also sold out of Alliant in a deal that valued the US broker at $4.5bn in 2017 after five years of ownership.
Last year Capital Z took a majority stake in Northern Ireland-based Prestige Insurance. And in 2017 Caisse de DĂ©pĂ´t et Placement du QuĂ©bec bought a stake in Hyperion Insurance Group, where General Atlantic is already an investor.
Life insurance has been getting tougher for some brokers. An influx of capital into the industry has dragged prices down in some lines of business, taking brokersâ€™ commissions with them.
In response, the industry has been consolidating, with smaller brokers looking to take advantage of economies of scale as they fight the industryâ€™s big players such as Aon, Marsh and Willis Towers Watson.