Hub secures minority investment from LGP at $23bn valuation

Hub International Limited has entered into an investment agreement with Los Angeles-based private equity firm Leonard Green & Partners (LGP), with the broker having a current total enterprise valuation of $23bn.

Chicago-based Hub expects to receive a substantial minority investment from funds managed by LGP.

Hub said its current valuation represents the largest enterprise value to date for a private insurance broker.

The valuation has grown fivefold over the past 10 years. Hub had a valuation of $4.4bn and annual revenue of more than $1bn in 2013 when Hellman & Friedman (H&F) initially invested in the broker.

In 2018, Hub’s revenue exceeded $2bn and its valuation had grown to $10bn in connection with Altas Partners' substantial minority investment in the company.

In 2022, Hub hit $3.7bn in annual revenue and is valued at $23bn today.

When announcing the LPG investment, Hub said it intends to explore bringing on additional minority investors in the coming months. The proceeds of these investments will be used to repurchase equity interests from existing equity holders.

H&F will retain a controlling interest in Hub, while the company's management team will continue to hold a significant equity position. Additionally, Altas will remain a significant minority shareholder and continue to be represented on the board.

LGP will be joining the board.

"Despite the headwinds of the pandemic, interest rate hikes, and a global economic downturn, Hub has demonstrated its ability to persevere and excel,” said Marc Cohen, president and CEO of Hub. “In the last 4.5 years we've delivered a 2.5 times ROI.”

Hub highlighted its ongoing investments in industry and product specialisation, digital solutions, brand marketing, broadening of employee benefit and human resources services, expansion into retirement and private wealth, growth in MGA/wholesale capabilities, and most recently expanding complex risk and international solutions.

The company said it will continue investing in these areas as well as new initiatives to reflect the changing needs of clients.

“Further, Hub remains bullish on its acquisition strategy and growing its geographic footprint,” the broker said.

H&F partner Hunter Philbrick commented that Hub is now the fifth largest broker in the world “and is growing faster today than at any point in its history”.

Hub now has more than 16,000 employees in offices located throughout North America.

Adam Levyn, partner at LGP, stated: “Hub is the premier insurance broker and has all the attributes we look for in investments – a best-in-class management team, a differentiated culture, a long and consistent track record of success, and multiple ways to grow.”

LGP was founded in 1989 and now has $70bn of assets under management. Since inception, it has invested in over 120 companies in the form of traditional buyouts, take-private transactions, recapitalisations, growth equity, and selective public equity and debt positions.

The transaction is expected to close in Q3 2023 and is subject to customary closing conditions and regulatory approvals.

Morgan Stanley is serving as exclusive financial advisor to Hub, with Thacher & Bartlett as legal counsel and MarshBerry providing market research assistance. Barclays acted as exclusive financial advisor and Latham & Watkins as legal counsel to LGP.

This latest investment in a North American broker follows Ohio-based retailer BroadStreet Partners supported by capital from its owner Ontario Teachers’ Pension Plan earlier this month announcing it is investing in Canadian retailer Westland, in a deal that sees Blackstone Credit exiting its investment.