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CD&R makes 3.2x its money on Tranzact

During CD&R’s investment period, Ebitda and revenue grew 60 percent and 40 percent, respectively.

Clayton, Dubilier & Rice generated a gross multiple of 3.2x on Tranzact, which helps consumers connect with health insurance policies, according to a source familiar with the situation.

The private equity firm announced the  sale of Tranzact to global insurance broker Willis Towers Watson on Mar. 31. The $1.3 billion deal closed Tuesday in all cash.

The $200 million potential earnout included in the initial agreement has since been eliminated.

In connection with the transaction, CD&R received total proceeds of approximately $812 million and generated a gross IRR of approximately 47 percent, the source said.

CD&R’s investment dates back about three years. Through Fund IX, a $6 billion pool, the firm made an approximately $255 million investment in Tranzact in July 2016.

During CD&R’s investment period, Ebitda and revenue grew 60 percent and 40 percent, respectively, the source said.

The company’s Ebitda grew at a 16 percent compound annual growth rate through the closing of the transaction, while revenue equated to a 13 percent CAGR, the source added.

Fort Lee, New Jersey-based Tranzact helps insurers maximize branding and sales via various marketing services and technology. Its services and software use social media, personalized email campaigns, website design, pay-per-click campaigns and search engine optimization.

Led by CEO David Graff, the company employs some 1,300 people, including 850 licensed agents. Its products link consumers with insurance policies including Medicare Advantage and Medicare Supplement Drug Plans, as well as specialty channels such as dental, vision, life and indemnity.

The closing of the transaction comes amid the late stages of a sales process for Norwest Equity-backed GoHealth, which offers similar services to Tranzact.

Buyouts reported in early July that GoHealth was seeking a buyer via William Blair that could produce a transaction valued in the $1 billion to $2 billion range.

Another similar publicly-traded business, Health Insurance Innovations, announced July 26 that it had launched a process to explore strategic alternatives, which could include a sale of the company among other things.

Action Item: Check out CD&R’s latest Form ADV: https://bit.ly/2LPovQG