Hank Greenberg PE affiliate to buy ACA Compliance from New Mountain

New Mountain Capital is selling ACA Compliance after four years to a private equity firm affiliated with Maurice “Hank” Greenberg.

Starr Investment Holdings LLC said Jan. 9 that it agreed to buy ACA. Terms weren’t disclosed.

ACA Compliance, New York, provides regulatory compliance products and services, including cybersecurity and risk assessments. Clients include private fund managers and broker-dealers, as well as international and domestic banks.

ACA was the strongest government-compliance platform that Starr had seen, a source said. Starr, which is also an ACA customer, expects to expand the company globally and invest in technology by bringing in risk analytics, the person said. “There is a significant amount of data analytics that can be used in this space,” the source said.

Starr acquired all of ACA except for management’s stake. The company will continue to be run by its founders, including ACA CEO Rob Stype.

New Mountain invested in the company in 2013, buying a controlling stake from ACA’s founders and original partners. It put ACA up for sale in the fall, hiring Raymond James to advise on the process.

In November, ACA walked away from sale discussions with a strategic, Buyouts reported. This enabled Starr, which had known ACA for several years, to step in, the source said. Buyouts pegged the sale of ACA at $400 million to $500 million.

New Mountain used its fourth fund, which raised $4.13 billion in 2013, to invest in ACA. In September, New Mountain closed its fifth PE fund on $6.15 billion, beating its $5 billion target. ACA will produce an IRR of more than 100 percent for New Mountain, a second person said.

Starr Investment is the PE affiliate of CV Starr & Co. CV Starr founded American International Group, once the world’s largest insurance and financial services company, which was led by Greenberg. He is the chairman and CEO of CV Starr, his bio said.

Geoff Clark, former co-head of Goldman Sachs Private Equity Group, currently leads Starr Investment, where he is a senior managing director. The New York firm invests in technology-enabled services with a focus on financial services and healthcare.

Starr Investment does not have a fund but manages money, on a deal-by-deal basis, from Starr’s balance sheet. It also raises capital, on a deal-by-deal basis, from outside investors, which include institutions and wealthy families, the first source said. As such, Starr’s investment horizon can extend beyond the typical five-to-seven-year period of most buyout shops.

Starr’s PE investments can vary from as small as $100 million to as big as $1.5 billion. The firm’s last few deals fell, however, in the $500 million to $1.5 billion range, the first person said. It competes with middle-market and large buyout shops.

The firm is highly selective, the source said. Starr has not done a deal since the end of 2016, when it invested in CHG Healthcare Services, which is also backed by Leonard Green & Partners and Ares Management. In 2016, Starr sold MultiPlan to Hellman & Friedman, making close to 4x its money on the deal, according to press reports.

Brendan Ryan, Garrett DeNinno and Chad Bounds of Raymond James, along with Credit Suisse Securities (USA), provided financial advice to ACA/New Mountain. Kirkland & Ellis was their attorney. DLA Piper provided legal advice to ACA Compliance.

Latham & Watkins was the attorney for Starr.

Action Item: Contact Geoff Clark at +1 212-230-5050

Maurice “Hank” Greenberg, former chairman of AIG, arrives at New York State Supreme Court in Manhattan on Sept. 29, 2016.  Photo courtesy Reuters/Brendan McDermid