Winnipeg-based group benefits provider People Corp. is selling itself to a division of Goldman Sachs for $1.13-billion in cash, extending an unusual run of billion-dollar sales for companies outside of Canada’s major tech hubs.
Founded in 2007 by Laurie Goldberg, a former financial services executive, People Corp. designs and manages group benefits and group pension services for 1.6 million Canadians through partnerships with thousands of companies across the country.
The company’s sale follows a strategic review launched by its board of directors, and the buyer, Goldman Sachs’s merchant banking division, had to outbid aggressive rivals to win the auction, Mr. Goldberg said in an interview. The purchase price amounts to 18 times the company’s expected 2021 earnings before interest, taxes, depreciation and amortization (EBITDA), which is a rich multiple for an insurance platform.
Lofty valuations have become commonplace in buyouts this fall because private buyers are often stuffed with cash or able to borrow at extremely low rates. The liquidity has ignited a mergers and acquisitions storm, and the money is flowing to multiple levels of the corporate ecosystem, not just mega-deals for the most valuable companies.
In Canada, the cash is being spread around with multiple emerging companies selling for more than a billion dollars in regional markets. Despite concentrated hubs in cities such as Toronto and Montreal for sectors such as artificial intelligence, the latest deals have included buyouts in cities ranging from Winnipeg to St. John’s to Calgary.
In early December, Calgary-based Benevity was sold to a British private equity firm for US$1.1-billion, giving it “unicorn” status in the venture capital world. In November, Verafin, which is based in St. John’s and sells fraud-detection software, was sold to Nasdaq Inc. for US$2.75-billion, marking Canada’s largest software takeover since 2007.
For People Corp., the sale offered the opportunity for a big backer with ample capital to take control and spend the necessary money to upgrade technology platforms that both manage benefits plans and allow users to access and manage their benefits.
At the same time, the purchase price was hard to ignore. The $1.13-billion price equates to $15.22 per share, which is a 36-per-cent premium to Friday’s closing price.
“Merging with Goldman is the best of both worlds,” Mr. Goldberg said of the double-barrelled benefits.
Mr. Goldberg is a former accountant who served as managing partner at Arthur Andersen and was later an executive at Assante Corp. before its sale to CI Investments in 2003. He founded People Corp. in 2007, and took it public in 2009 through a merger with Groupworks Financial Corp., which was already listed.
“When we started this journey, we really saw this as a highly underserved market,” he said. The group benefits sector was extremely fragmented and clients weren’t always given advice – group benefits were seen as more of an administrative function.
Over the past 13 years the business has become much more sophisticated, and the sector has also seen some consolidation – particularly at the high end of the market that services large employers and government accounts. People Corp., which now has roughly 1,200 employees, has been a consolidator, mostly of smaller companies.
To differentiate itself, People Corp. has built its business around serving a spectrum of clients, from small and medium-sized enterprises to large companies. The company also now offers everything from benefits consulting, which is often provided by large companies through fee-based consulting, to implementation and benefits plan management. Many rivals focus on one segment of services.
Despite its diversified business model, the benefits sector faces disruption from startups with newly developed technology platforms that offer the management of health care costs, slick user experiences and the integration of health and wellness applications.
Amid the shift, new technology is necessary to compete. As is common in many industries where new software has increased user engagement, growing quickly is crucial. “Scale is increasingly important in our industry,” Mr. Goldberg said.
Tim Kiladze