A private equity take-over led by Andy Haste would be the perfect solution for Direct Line
Direct Line Group may be intent on pursuing a flotation, but an Andy Haste-led private equity takeover could be just what the company needs.
Direct Line Group has slated the second half of this year for the first portion of its stock market listing, with a further offering to take place in 2013. The problem is, almost everyone in the insurance industry with flotation plans has put them on hold indefinitely because of appalling market conditions, which are showing few signs of improving.
A private equity takeover would be a perfect solution and would spare Direct Line parent The Royal Bank of Scotland the indignity of asking the EU for more time to hive off its insurance arm. Furthermore, if the rumours are true, the company could tap into Haste’s vast experience of running a listed non-life insurer very successfully for a number of years.
There is no shortage of rumours circulating about Direct Line Group, but this one seems to stack up. Haste is a very capable insurance executive and will not want to sit on the sidelines of the industry for too long.
He may also be keen to avoid being typecast as someone who turns companies around, as he did with RSA. This would make Direct Line a good fit - chief executive Paul Geddes and team have already put the insurance group on a firm footing.
Private equity has well-documented drawbacks, but an IPO is no silver bullet either. Investors generally find insurance companies difficult to understand and so often undervalue them, and the pressures of pleasing shareholders are just as acute for a listed company as for private equity owned one.
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