To find a buyer for its 75% stake in Financial Horizons Group, Genstar Capital is preparing to give research mandates to two investment banks: BMO Capital Markets and Evercore.
Genstar Capital declined to comment on this information, which The Insurance and Investment Journal obtained from sources who asked to remain anonymous.
Operating in the United States, Mexico and Europe, Evercore describes itself on its website as “a premier independent investment banking advisory firm”. Its independence enables it to be free of conflicts of interest, the firm says. Evercore, however, does not have a representive in Canada, according to its website.
BMO Capital Markets is an investment banker specialized in equity research for mergers and acquisitions. It is also active in equity financing for investors requiring capital.
One source – who is well informed on venture capital financing for financial services distribution networks – suggested that three Quebec-based investment funds would likely have the capacity to invest. The Fonds de solidarité de la FTQ, the Caisse de dépôt et placement du Québec and NOVOCAP, which is one of Canada’s leading private equity firms.
According to our sources, Financial Horizon’s EBITDA (earnings before interest, taxes, depreciation and amortization) is now at about $30 million. Based on sales ratios observed in the distribution sector of the industry, the market value of the MGA would be around $300 million.
Much speculation in the industry
Such an investment could be financed in different ways, explained our source. “About a third could be made through the purchase of paid shares, another third could be through bank debt, and a final third could be subordinated debt.” This approach could attract a wider range of potential investors. Such a financing arrangement may seem complex, but is quite routine for financial institutions and venture capital firms, says our source.
There is currently much speculation in the industry about what industry players are capable of acquiring Genstar Capital’s stake in Financial Horizons Group – one of the largest Managing General Agencies in Canada.