Capital Z Closes Three Financial Services Deals

Internet, Europe and insurance. In a hyperactive week of deal closing, Capital Z Partners led deals in each of these areas, committing more than $150 million from the $1.85 billion Capital Z Financial Services Fund II.

Capital Z wound up this funding frenzy last Monday, when the firm led LendingTree Inc.’s $50 million third round financing, which was placed by Prudential Securities private equity financing group.

Joining Capital Z in funding the Web-based lender were GE Capital, The Goldman Sachs Group Inc., Marsh & McLennan Capital and strategic partner Priceline.com, said Doug Lebda, founder and chief executive of LendingTree.

Lebda said the vast majority of the new capital will be funneled directly into a three-pronged marketing campaign planned for the next 12 months. The first effort will see the company continue, and expand, its offline advertising campaign. Step two will be a revved up effort to expand LendingTree’s affiliate network, which consists of the company providing sites with loan calculators and other services. The third portion of the strategy will see expanded strategic relationships with firms like Priceline.com, where LendingTree provides back-end service for its partner sites.

“In particular, we like [LendingTree’s] variety of products, and its strong position in the marketplace,” said Adam Mizel, a partner at Capital Z.

The midpoint of the spree of deals was Sept. 17, when the firm invested $90.5 million in the convertible preferred stock of USI Holdings Corp. USI’s existing investors committed $34.5 milllion, after exercising anti-dilution rights, driving the total size of the equity financing to $125 million. Following the deal, Capital Z became the San Francisco-based company’s largest shareholder.

The world’s sixth largest insurance brokerage firm, USI has been formed through the acquisition of 103 smaller brokerages. Capital Z Partner Brad Cooper said the proceeds from the financing will be coupled with a $200 million bank loan the company established through administrative agent Credit Lyonnais America to continue its acquisition-based growth strategy.

“I think this company is IPO-able now,” Cooper said. “The full spectrum of product offerings that made them attractive to us will be attractive to the public.

The week began Sept. 15, when the firm led Dublin, Ireland-based Enba Plc’s euro45 million (US$46.8 million) second round financing, which also saw commitments from Morgan Stanley & Co. International Ltd. and CGU Plc, Britain’s largest life and general insurance company. Structured as a holding company, Enba is operating as an incubator for three financial services technologies.

The company’s first technology is an Internet bank, or all-finance company, that offers an all encompassing account under European rules that permit banks to operate as a broker-dealer. The other two sites that are still under development, include a personal financial management site and an online investment bank.

“This will be the last round for the holding company, as all future financings will be done for the individual companies,” said Mark Gormley, a partner at Capital Z. “My guess is they will end up having all three stand alone with [separate] shareholders and capital structure.”

Gormley said proceeds from the funding will expand the online bank’s reach beyond the U.K., where it is already launched, into Germany, France, Spain and Italy, in that order.