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Marsh & McLennan to Sell Kroll Arm for $1.3 Billion

Source: Financial Times

Posted on 09 Mar 2010

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Marsh & McLennan, the global insurance broker and consultancy company, has put its corporate investigations division Kroll up for sale for about $1.3 billion and attracted a stream of private equity interest in first-round bidding.

The Carlyle Group, Apax Partners and General Atlantic all entered bids by the deadline for first expressions of interest in late February, while BC Partners may also be interested alongside one or two trade bidders, according to people familiar with the situation.

Brian Duperreault, chief executive of Marsh, said it could sell parts of Kroll in May 2008 after a $425m write-down on the value of the world’s biggest corporate security group dragged the group into a first-quarter loss.

His statement followed an approach for Kroll, which has about $650m in annual revenues, by David Buchler, its former European chairman, in partnership with BC Partners.

There were other expressions of interest, including from founder Jules Kroll, who sold the business to Marsh in 2004 for $1.9bn.

Mr. Kroll declined to say whether he was part of the current bid process. “I am staying close to the situation,” he said. “We have the highest regard for our old mates.”

The founder of Kroll recently launched a new boutique investigations firm called K2. He no longer owns a significant stake in Marsh.

The auction is the latest twist in the history of Kroll, which pioneered corporate investigations and has expanded into computer security and restructuring.

Almost since it was bought by Marsh, there have been rumours that Kroll was a poor strategic fit and the insurer was considering selling it.

MMC has been under pressure to examine its disparate corporate structure, which includes its core insurance broking business Marsh, the consultants Mercer and Oliver Wyman, and reinsurance broker Guy Carpenter, as well as Kroll.

Washington-based Carlyle – once dubbed the ex-presidents' club for hiring political heavyweights such as former US president George Bush senior and former UK prime minister Sir John Major – has historically had a strong focus on the defence and security sectors.

Experts in corporate restructuring are expecting a boom in the next few years, as private equity-backed buy-outs and other indebted companies experience difficulties as a result of the credit crunch and the subsequent economic slowdown.

The purchase of Kroll was the brainchild of Jeffrey Greenberg, who resigned in 2004 amid accusations that Marsh had falsified and rigged bids on contracts and favoured insurers at the expense of clients in return for higher commissions. Marsh settled the allegations, but neither admitted nor denied wrongdoing.