When Michael Marcon, the CEO of Equity Risk Partners, a San Francisco-based benefit firm specializing in private equity clients, was asked whether or not the firms recent success would inspire him to expand their client base to another niche, he quipped, Sure. Once weve worked on every private equity deal for every private equity firm.
His commitment to the market is unwavering, says Kevin Blake, the firms vice president of employee benefits. We are the only firm of our kind that is 100% focused on private equity. We still know theres a fair amount of value we can provide and glean in this market.
In a sea of benefit brokerages big and small, one way firms and benefit advisers are choosing to differentiate from the competition is to specialize in a niche market.
Susan Friedman, a niche marketing expert and author of Riches in Niches: How to Make It BIG in a Small Market, says targeting a niche market has several benefits, including the fact that marketing is less complicated and expensive when you target a niche or specific client profile, and that people pay more for services from perceived experts than generalists.
Call in the experts
Its just that sort of expert status that has helped Equity Risk Partners make a name for itself in the private equity firm market.
A private equity firm is an investment manager that makes investments in the private equity of operating companies through several different strategies, including leveraged buyout, venture capital and growth capital.
Equity Risk Partners was founded in 2001 by Marcon, who has more than 25 years of insurance experience, with a specialization in alternative risk financing and transactional insurance products. Before launching Equity Risk Partners, Marcon was executive vice president of Aon Risk Services Mergers and Acquisitions Group.
Bob Zenoni, president of Equity Risk Partners, says Marcon strongly believed in the need for a market expert in this niche, so Marcon left Aon to do the classic startup thing. He mortgaged his house and started his own firm.
Zenoni, who has been with the company for about 13 of its almost 15 years, says the firm now has more than 500 clients and has worked on more than 1,400 private equity transactions.
Therere a lot of brokers that say they have the mergers and acquisition expertise, but unless you have a lot of experience, thats a hollow promise, says Blake. Each one is different. Having a consistent focus in the private equity space allows us to see around corners and allows us to be better advisers to our clients.
Equity Risk Partners is a full service insurance brokerage and risk management consulting firm. In addition to property and casualty and employee benefits, the firm offers specialized insurance products related to transactions themselves. The firm has about 40 employees in three separate offices across the U.S., including Chicago and New York in addition to its San Francisco headquarters.
For private equity firms, the brokerage manages the insurance and employee benefits programs of portfolio and investment targets and evaluates, implements and manages portfolio aggregation strategies. For portfolio companies, the brokerage also reviews existing insurance programs to evaluate adequacy and competitiveness of coverage and customize programs to accommodate acquisition and other strategic/financial initiatives.
To a certain degree, we serve two separate clients the portfolio company itself and its private equity sponsor, says Blake. There is a tremendous pressure to perform in an almost perfect manner. Because when we have a deal with a client, we have deals with several companies its not just one company we serve, but several.
Erin Teter, vice president of Human Resources at Abila, an Equity Risk Partners client since 2013, says the firm understands some of the challenges that investment companies have with having the small founder-based business as part of the portfolio. They are able to provide a more consultative approach when working with companies that I have not experienced previously with brokerage firms.
She says Equity Risk Partners was able to help Abila secure an employee benefits package that is highly competitive in the market, despite some unforeseen challenges.
In addition, she says, They have been able to ensure that those benefits remain competitive with minimal increase in price to the employer. They have also been the guiding star around many of the changes in the health care system (i.e. the Affordable Care Act) and ensuring that I am up to date and continue to be in compliance as an employer.
The services ERP provides go above and beyond any other brokerage firms I have worked with in the past, Teter adds. They care about their customers and strive to ensure their success.
Were the ultimate specialist and the ultimate generalist, says Zenoni. Firms our size in the insurance brokerage business typically have either a geographic or industry focus. Because of where our clients come from they come as a result of these transactions we end up with clients in all 50 states, and all variety of industries blue collar, white collar. It makes for a challenging environment to try to service that much diversity.
In an effort to overcome the geographic hurdles, Zenoni says the firm tries to utilize technology as much as it can.
Also, he says, the firm hires people with broad backgrounds.
We also try to hire people who work well in teams. Everything we do is in a team environment, Zenoni says.
When we get engaged by a private equity firm and involved in the due diligence process, we assemble a team on our end that works with the team at the investor firm. Our team consists of people with different disciplines: P&C, employee benefits, transactional products, etc. We consolidate our findings and submit them to the private equity firm.
The need for partnerships
Acknowledging that its impossible to be an expert in all areas, Zenoni says the firm works closely with other industry experts when needed.
We have the word partners in our name for a reason, he says. We have developed relationships with a lot of other firms and specialists in various areas so that when we need somebody with specialized expertise, we can call on them.
Zenoni feels this is a value-add the firm offers that many larger firms dont.
Its a little different than the bigger brokers we compete with, he says. They tend to have the resources in-house, so the client gets access to whatever resources the firm has available. But, were able to look at the needs of the clients and then go get the appropriate resources to meet those needs.
For example, Blake says, Weve recently seen a spade of staffing companies targeted for acquisition. Staffing companies are most profoundly impacted by the Affordable Care Act, and weve been able to look at those deals and provide more meaningful diligence that goes deeper than what our competitors are providing.
Specifically, because the firm has already worked on deals with other staffing company acquisitions, Blake and Zenoni say they have experience with the challenges, pitfalls and necessary requirements such a transaction entails.
Because many of the transactions of the firms client companies also involve companies with a national or global presence, the firm also carries a breadth of knowledge about benefit plans and insurance requirements in multiple states and even countries.
Its not the first time weve seen it. Weve learned from our previous experience, Blake says. Any time we have a company in a new state, we are diligent about researching the local insurance markets and statutory requirements applicable to those companies so that we can better advise and serve their specific needs. Thats not to say we havent seen anything new, but we have a foundation to build upon.
Likewise, working with private equity firms often requires fast thinking and quick action.
We work on private equity time and often these deal transactions have very short fuses, says Blake. The ability to hit the ground running at a short notice is critical.
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