May 7, 2013

Insurance Software M&A Deal Activity Intensifies: Goldman Sachs Acquires EBIX for $820 million

Last week’s announcement by EBIX (NASDAQ:EBIX) that it has agreed to be acquired in a going private transaction led by a Goldman Sachs Merchant Banking affiliate adds an exclamation point to the recent activity in the Insurance Software/Technology space. While only an 18% premium to EBIX’s closing price the day before, that has more to do with some of the controversy surrounding the company and an alleged SEC investigation.  More important, is the fact that in light of those challenges, Goldman still believes that EBIX offers a very interesting opportunity at almost 4X Revenue and 10X EBITDA.

The EBIX announcement is the latest in a series of transactions taking place in the Insurance Technology space.  In March of 2013 there were three deals announced; 1) Applied Systems, a Bain Capital Portfolio company, acquired IVANS Property & Casualty Information Exchange which was backed by an insurance industry consortium, 2) Insurity, the Genstar Capital backed Insurance Technology business,  acquired AQS, which was previously owned by Grey Mountain Partners  and 3) SAP acquired Camilion, which was backed by several Canadian venture capital firms including Celtic House Venture Partners, GrowthWorks, and MMV Capital Partners . That is quite a month for Insurance Technology and the Private Equity/Venture Capital groups that invest in the space.

This latest wave of heightened interest in the Insurance Technology market really started about 18 months ago when Accenture acquired Duck Creek. Based on our market assessment, we expect to see continued interest and intensified activity levels in the Insurance Technology markets. With insurance carriers greater acceptance of third party software products and a willingness to look at outsourcing as a key strategy – we expect that the M&A activity level will continue to ramp up as larger software and outsourcing vendors position themselves to  capture a piece of this large and growing market. In addition, we expect to see continued investment by the private equity community as there is a strong belief that we are still early in this refresh cycle.