Term Sheet

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Hub International pays off for Apax

August 5, 2013: 11:33 AM ET


Apax generates big return from $4.4 billion sale of global insurance broker Hub International.

FORTUNE -- Private equity firm Hellman & Friedman this morning announced an agreement to acquire Chicago-based insurance broker Hub International for approximately $4.4 billion. The primary seller would be Apax Partners, which took Hub private in 2007 for approximately $1.8 billion.

Some notes on the deal:

1. The 2007 take-private included around $700 million in equity, from Apax, Morgan Stanley Principal Investments (MS) and Hub International employees. Apax put in the largest piece, and is expected to generate a 3X return. Fairly impressive, given that most 2007 deals were done at inflated valuations (Hub's take-private was at a 28% premium to the 90-day trading average).

2. Reuters had reported in April that Apax was seeking "around $2 billion" for Hub. My understanding, however, is that the report was off base at the time. Or, as one source puts it to me, "I think someone blew the math."

3. Since the time of its original buyout, Hub International effectively doubled EBITDA. Some of this was via acquisitions -- financed primarily via new debt -- and geographic expansion into new markets like Brazil.

4. The equity sponsors did not take a dividend during their ownership, nor was there serious consideration of taking Hub private. Due to its heady cash-flow (which, in turn, enables leverage), it was always considered an M&A exit to either a financial buyer (like Hellman & Friedman) or a strategic.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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