Willis Towers Watson to Acquire TRANZACT
Willis Towers Watson announced the acquisition of TRANZACT, “a direct-to-consumer health care organization that links individuals to U.S. insurance carriers.” TRANZACT will operate as “an integral part” of Willis Towers Watson’s Benefits Delivery and Administration (BDA) business, which focuses on the development and delivery of administrative solutions for employers, employees and retirees.
TRANZACT, which employs ~1,300 individuals, including 850 licensed agents according to the press release, combines digital marketing, sales and “data science expertise” to connect individuals to leading US insurance carriers. The company currently markets a range of products including Medicare Advantage, Medicare Supplement, Prescription Drug Plan (PDP) and an array of ancillary products including dental, vision, life and indemnity.
The total purchase price is $1.2b in closing consideration, with an additional potential earn-out of up to $200m payable in either cash or stock in 2021 if certain financial targets are achieved. The total purchase price includes $1.1b of cash consideration and $100m of cash or stock consideration payable at close. Upon closing, the transaction is expected to be immediately accretive to Willis Towers Watson on an adjusted earnings per share basis. The transaction is expected to close in the third quarter of 2019, subject to customary closing conditions and regulatory review and approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act.
“We are delighted to announce the acquisition of TRANZACT which represents a significant growth opportunity in the direct-to-consumer U.S. health care space and speaks to Willis Towers Watson’s renewed focus on strategic M&A opportunities. This deal will accelerate our direct-to-consumer strategy and help create an end-to-end consumer acquisition platform.” – CEO of Willis Towers Watson, John Haley.
“We believe joining our complementary strengths and strategies will greatly benefit TRANZACT’s carriers and consumers. The powerful combination of our technology-driven, direct-to-consumer solutions and Willis Towers Watson’s scale, leading infrastructure and participant engagement capabilities creates a unique and differentiated capability in the marketplace.” – CEO of TRANZACT, David Graf.
“Under a strong leadership team, TRANZACT has built a world class lead generation capability underpinned by cutting edge technology and analytics. We see a bright future for TRANZACT and its valued consumers as part of Willis Towers Watson. The CD&R team looks forward to working closely with Willis Towers Watson to help with integration and growth through 2020.” – CD&R Operating Partner and Chairman of TRANZACT, Russ Fradin.
“Reaching consumers directly will significantly advance our overall growth strategy. Willis Towers Watson will now have access to an additional 35 million retirees and growing through direct-to-consumer channels and will be able to serve a diverse market that is growing at approximately 10,000 lives per day.” – Head of Willis Towers Watson’s BDA segment, Gene Wickes.
Some history. Fort Lee, NJ-based TRANZACT was founded in 2003 by private equity firm Halyard Capital in partnership with Marc Byron and the company’s current CEO David Graf. In 2007, Halyard sold the company to private equity firm Veronis Suhler Stevenson (VSS) for $185m – generating a 12-times return on its original investment in the company. In 2014, White Mountains acquired ~63% of TRANZACT for $178m, representing an enterprise value of ~$280m. Immediately following the closing, TRANZACT completed a recapitalization that resulted in the return of $44.2m to White Mountains. On July 21, 2016, White Mountains sold TRANZACT to private equity firm Clayton Dubilier & Rice, and received net proceeds of $221.3m. And now, Clayton, Dubilier & Rice has secured a 3x return on its investment in TRANZACT, after selling to Willis Towers Watson.
TRANZACT and its subsidiaries Cignium, and TZ Insurance Solutions, employ ~670 employees according to LinkedIn. The company owns and operates several domains such as autoinsurance.com, directhealth.com, and lifeinsurance.org.
Bottom Line: After ~16 years, 3 private equity firms, and one holding company, TRANZACT is finally in a committed relationship. However, based on the current landscape, this may end up in an ugly divorce as this space is now highly competitive.
