Calera Capital and TPG today completed their $630 million buyout of Direct General Corp., a Nashville, Tenn.-based provider of insurance products via a network of retail storefronts. As part of the deal, former Cendant executive Dan Tarantin will take over as Direct General’s new CEO. So we’ve got 5 Questions for Dan, including how he plans to help turn around a company whose stock had been tanking prior to the buyout announcement.
1. You’ve worked with Calera for the past two years, so what were you up to before the Direct General bid got made last December?
I started working with Calera in January of 2005 — after I left Cendant — to help identify and evaluate acquisition opportunities, with a particular focus on ones that could really benefit from my background. We actually first identified Direct General early in the process, back in 2005. We worked diligently to get the company and are pleased to be working with them.
2. How did Calera end up partnering with TPG?
I, as well as Calera, have known people from TPG for quite some time and there were a few other opportunities that we looked at during my two years with Calera. As we were getting further down the road with Direct General
and determined that there would be an opportunity for Calera, we approached TPG. They got up to speed very quickly and shared our excitement.
3. Lots of buyouts nowadays take very successful companies, and hope to make them incrementally more successful. This deal, though, is for a company whose stock price had really slumped prior to the buyout announcement. What areas for operational improvements and other changes do you see?
Early on we identified the company because of the growth it had achieved in previous years, and its unique business model in terms of offering services via storefronts. We thought that there would be a great opportunity to leverage the storefronts and customer relationships to provide them with additional products.
Upon getting closer to the company and doing more due diligence, we saw a number of things we could do to help the company grow organically. Some are operational improvements such as better workflows and imaging that will make the company more efficient. We also think there are more ways we can understand our customers better, and target them in a more focused way. Better service will increase the businesses’ top line.
With regards to what buyouts are or used to be, I have found working with Calera and TPG that it’s really about partnering with management – because they feel that management understands the business best. Calera and TPG prefer to take management’s long-term view of the business and work with them to identify ways to improve.
4. But, that said, you are taking over as CEO. How does that square with partnering with management?
This was a case where the existing CEO wanted to retire, but where there also was a strong management team that was interested in staying on. They see the vision that Calera and TPG and I have for the company, and the
buyout was really a joint effort between all the different parties.
5. Do you currently use any Direct General products, or do you plan to as CEO?
The true target customers for Direct General are individuals looking for help making their auto insurance payments. As such, Direct General’s premium financing, payment plans and low down payments help them to meet their auto insurance obligations under state laws. My job is to focus on that target customer.