Investors Genstar, Aquiline and Atlas have sold Ascensus in a transaction valued at $ 3 billion to bring together experts in the preparation of the Stone Point IPO, according to reports.
Genstar and Aquiline just sold Ascensus at a value of $ 3 billion after an asking price of $ 2 billion failed to attract buyers three years ago. See: After $ 2 billion asking price for Ascensus gets no bites, Genstar and Aquiline choose to sell 25% of their stake to a juice roll kitty
Stone Point Capital LLC and GIC, Singapore’s sovereign wealth fund, rewarded the two private equity investors for their faith and patience with a $ 1 billion or 50% premium for the Dresher, PA registrar.
“Previously, the market did not recognize what we saw as a substantial continued growth opportunity for Ascensus,” said Rich Rosenbaum, partner at Aquiline Capital Partners, in an email to RIABiz.
The company has become a private equity magnet for setting up third party 401 (k) administrators and health savings plans, becoming a standalone record-keeping force rivaling Fidelity Investments and others. See: Vanguard’s 401 (k) recordkeeper Ascensus set to roll up a world of third-party admins to create a tiny plan superpower
Holding out for a few years has a financial cost. Genstar and Aquiline sold 25% of their shares to Atlas Merchant Capital and GIC in 2018 at a much lower valuation.
The sale also means sacrificing the possibility of a real financial boost – namely, an initial public offering, according to Aaron Schumm, CEO of rival Vestwell, a record holder backed by venture capital. See: Aaron Schumm is in the catbird seat after Wall Street’s biggest jungle cat Goldman Sachs validates Vestwell by taking a big bite out of another $ 30 million fundraising round
“I was surprised that there was a PE game against a public IPO, because all intentions were, they were going to have an IPO later this summer.
“But there is a risk inherent in an IPO. I have an indication that Stone Point and GIC arrived with too good liquidity to be turned down,” he said.
“The cash-in-hand versus trying to go public and liquidate the property can be tricky. They just decided to take the $ 3 billion.”
Many factors played into the decision to act now, Rosenbaum says.
“We believe the time is now to sell given the strong market environment, the length of our investment holding and the continued growth opportunities for the next investor.”
Genstar and Aquiline both remain minority owners. The two companies have a combined stake of around 10%, according to the reports.
In the deal, valued at $ 3 billion, according to Bloomberg and other publications, Stone Point Capital in Greenwich, Connecticut, is stepping in as a new investor and GIC is a follow-up.
Stone Point Capital became the primary owner of Focus Financial in 2017 before turning it into an IPO fund a year later. See: Focus Financial’s IPO pays off for KKR and Stone Point, after all, by hitting the price plus an investor “ pop ”. Now on to the less glamorous task of paying off the debt
Getting Stone Point on board is important, says Dan Seivert, CEO of Echelon Partners.
“They are now acquiring the expertise of Stone Point which knows the space well and whose capital can be used to drive innovation, grow the brand and build on the customer experience.
If they can do these things, the growth in the value of the company will likely continue, ”says Seivert.
Stone Point Capital has been monitoring Ascensus for some time, said Charles A. Davis, CEO of Stone Point Capital, in a statement.
“We have been following the success of Ascensus for some time and see tremendous opportunities for growth and positive impact on the industry.”
Ascensus, which has more than 80,000 defined contribution plans and administers more than 1.4 million IRAs, provides white label software for Vanguard Group.
He made the news last fall when he lost the Oregon State retirement account to Vestwell. See: Vestwell Is On, And Ascensus Is Released In Oregon As Burgeoning “Force Function” State Retirement Plans Spoke Passionate Offers For Record-Keeping; RIAs are also looking for a cut
Ascensus is a classic roll up that quickly gained momentum by acquiring small businesses, but can be improved to make many small purchases work as a single streamlined unit.
Ascensus has a few dozen third-party administrators that it has gobbled up in recent years, but none of them are synced to the same system yet, says Aidan Yeaw, a 401 (k) consultant who has worked on a number of 401 (k)), including Fidelity Investments and 401Go.
To solve the problem, you have to hire large companies.
In April, Ascensus announced the hiring of industry veteran Teresa Hassara as chair of the Ascensus unit, FuturePlan, which is the company’s third-party administrator (TPA) business.
Hassara worked until December 2020 as President of Work Solutions for the Massachusetts Mutual Life Insurance retirement business.
“Looks like they want Teresa to bring all the systems together on one platform. There could be better efficiencies and economies of scale if they were all on one platform, ”Yeaw says.
Hassara was credited with overseeing a multi-year transformation as the Workplace Solutions Manager for MassMutual. See: Commonwealth CEO Wayne Bloom avoids repression of reps, abandons Advisor360 to sell software and research once exclusive to Mass Mutual and other competitors
“She has led and grown businesses with great success and led transformational change to benefit the client and the business,” said David Musto, president of Ascensus.
As part of the sale, which is expected to close in the third quarter, Atlas is withdrawing.
David Schamis, founding partner of Atlas and chief investment officer, has been involved twice as an investor in Ascensus.
Schamis spent 14 years as the Managing Director of New York-based PE firm JC Flowers and Co, which owned Acensus until 2015.
That year, Genstar and Aquiline acquired Ascensus from JC Flowers & Co. in a deal valued at an estimated $ 750 million, according to reports.
“It has been an honor to be an investor in Ascensus twice in my career,” Schamis said in a statement.
“Ascensus combines a strong market position with a highly skilled management team focused on shareholder value. I look forward to continuing to see them thrive. ”