New York – Earlier this week, it was reported that Marsh & McLennan Cos., the world’s second-biggest insurance broker, received an offer for its Kroll investigative research unit that values the subsidiary at $1.2 billion to $1.5 billion. The bid appears to have come from a private equity firm. Although identity of the bidder is undisclosed, the Financial Times named Carlyle Group, Apax Partners and General Atlantic LLC as firms that had made bids that may result in a $1.3 billion sale.
Kroll is a risk consulting company that specializes in helping companies, govt. agencies, and financial institutions conduct investigations into accounting practices and financial documents, carry out background checks, and enhance security procedures.
Since it was purchased for $1.9 billion in 2004 by Marsh & McLennan, Kroll has experienced some difficulties. Marsh & McLennan initially announced its plans to sell off parts of the Kroll unit in May 2008, after a $425 million writedown at the subsidiary caused a first-quarter loss. Those plans predate the financial crisis, which may have exacerbated difficulties for the unit. In June 2009, Kroll was named in a lawsuit by aggrieved Stanford International Bank investors, who alleged that Kroll had missed “numerous red flags” about Allen Stanford’s Ponzi scheme. Subsequent bad publicity about the firm‘s relationship with Stanford did not help matters.
Given the range of bids reported in the last week ($1.2 to 1.5 billion), it would appear that valuation of Kroll may have fallen somewhat since May 2008, when it was reported that former Chairman David Buchler and BC Partners would bid “between $1.5 billion and $1.6 billion” for Kroll.
Although its recent difficulties may have bruised Kroll’s standing in the eyes of its current owners, Kroll remains a leading player in the corporate investigation space. It is entirely possible that the firm will regain its lustre under new ownership, especially if the acquirer intends to have a long term interest in the the research space.