In recent years, we have seen significant private equity investment in workers’ compensation vendors. Why are they interested in workers’ compensation? What are they looking for when they make investments? At the WCI’s 2017 Workers’ Compensation Educational Conference Kimberly George, Sedgwick Claims Management Services lead a panel in a discussion around investing in your workers’ compensation. The panel included:
-Dave North, President and CEO, Sedgwick Claims Management Services
-Shelley Boyce, CEO, MedRisk
-Jeff Livingston, Principal, Private Equity, KKR & Co.
-Jeffrey McKibben, Managing Principal, Odyssey Investment Partners, LLC
The industry is fragmented and there are opportunities to invest in the systems and people. The are more capabilities when you invest in your team and collaborate. Private equity is a unique layer in the middle of investing. With private equity you don’t have a quarterly marker you can have a daily marker. This allows the company to see if that marker moving in the right direction. If not, there is opportunity for change sooner rather than later. Companies are purchased by a company in the business who has the knowledge. Unlike other types of investments, private equity partners will get a divorce when things are going great because this is when you are doing your best so the investment is at its peak.
Business model of private equity is to give more return on investment than the company initially invested with the private equity company. When you are looking for a private equity partner it’s important to look for a company who wants to be an invited guest to the party. Private equity companies don’t think about an exit strategy. They think of it as more of an entrance strategy for the next company to invest. Private equity companies wants more flexibility. In workers compensation, we are all in the service/people business. Investing in your employees and systems shows and demonstrates your commitment to growth in the company. This is a business strategy to invest in growth.