Insurance service provider Direct Group is to hit the acq-uisition trail following a £40m management buy-out backed by a private equity firm.

The buy-out was led by former GAB Robins boss Derek Coles who joined Direct Group last year.

Coles, who becomes chief executive of the group, said he would now look to make acquisitions over the next three years.

“Our plan is to take it to £20m turnover through organic and new business growth,” he told Insurance Times.

Direct Group has not made any acquisitions to date.

Coles refused to disclose which companies Direct Group was eyeing, but said he was interested in acquiring businesses that could expand its product or service portfolio within the SME market.

Coles added that Direct Group had a clear growth strategy with turnover projections for 2008 of £8m and a profit of £5.5m.

Direct Group is looking to make senior appointments to its team, particularly those with underwriting expertise and account management experience, said Coles.

The buy-out was backed by private equity firm LDC, which invested £21.3m in return for a “significant” minority stake.

Based at sites in Doncaster and Halifax, Direct Group provides a range of value-added services to insurers and corporate partners, including policy administration and fulfilment, commission management, premium collection, claims handling and performance reporting.

It works across the product sectors of property, motor, life and casualty – focusing predominantly on property and protection insurance schemes.

Direct Group currently manages 3.7 million policies and has 1.5 million customers with a gross written premium of £340m.

Latest figures filed with Companies House show a turnover of £7.9m and a pre-tax profit of £4.5m for the year ended 31 January 2006.