DALLAS—Crump Group Inc. will be in better position to grow its business when its sale by Marsh Inc. to private equity firm J.C. Flowers & Co. L.L.C. goes through, according a top executive at the Dallas-based wholesaler.

As an independent wholesaler with backing and advice from New York-based J.C. Flowers, Crump will be able to move forward without concerns arising from investigations into retail brokerages, said Glenn Hargrove, chief operating officer of Crump.

"Being under Marsh ownership, particularly post-Spitzer, I don't think that was the best position for us to be able to continue to grow," Mr. Hargrove said. "Being independent is going to be a big factor for wholesalers going forward, and we are pleased to be amongst those ranks."

J.C. Flowers is one of several private equity firms interested in investing in the wholesaler market, and ownership by the investment firms should bring benefits to the whole sector, observers say.

New York-based Marsh last week announced a definitive agreement to sell Crump to J.C. Flowers. Terms of the deal were not disclosed, and J.C. Flowers Chairman Christopher Flowers did not return telephone calls. Business Insurance estimates that Crump generated gross revenues of $94.9 million in 2004, making it the fourth-largest wholesaler (see chart, page 26).

Mr. Hargrove described the arrangement between J.C. Flowers and Crump's upper management as a "partnership." But he declined to disclose specific details of the arrangement or say how much of an ownership stake Crump managers might retain.

Crump's current nationwide office structure will remain unchanged. The sale includes the Hamilton, Bermuda, office of Price Forbes Ltd., another Marsh wholesale unit, though the remaining operations of London-based Price Forbes are not included in the deal and remain on the block.

Crump management moved for conclusion of its sale to J.C. Flowers so that the deal could be announced before this week's National Assn. of Professional Surplus Lines Offices Ltd. meeting in San Francisco, Mr. Hargrove said. That way, Crump could spend its time at the meeting discussing its new arrangements with clients.

Analysts say that one possible concern for Crump may be the amount of business that will continue to flow from Marsh once the sale is completed. However, terms of the deal may have addressed that issue, and Crump could now pick up even more business from independent retailers that previously shied away from Crump because of its Marsh affiliation, they say.

For Crump, the purchase by J.C. Flowers represents an opportunity to expand while joining the growing trend toward independently owned wholesalers, Mr. Hargrove said.

Several wholesale broker sources and investment bank sources said competition was stiff as several private equity firms bid to purchase Crump.

Marsh first announced in May that it was exploring options for selling Crump. Earlier in the year, Willis Group Holdings Ltd. sold its wholesaler, Stewart Smith Group, to American Wholesale Insurance Group Inc.; and Aon Corp. said it was putting its wholesale operation, Swett & Crawford Group, on the block.

The moves were widely believed to have been prompted by New York Attorney General Eliot Spitzer's investigations of the insurance brokerage industry. The sales are intended to remove any suggestion of a conflict of interest stemming from a retailer owning a wholesaler.

Private equity pluses

The Crump deal is an example of how new private equity firm investment in the insurance distribution businesses is beginning to provide wholesalers with new growth capital and an opportunity to cement an identity apart from retail brokers, said James Inglis, managing director at Philo Smith & Co., a Stamford, Conn.-based investment bank (see story, page 11).

With private equity firm backing, surplus lines brokers "are going to be a lot bigger relatively speaking than wholesalers were previously," Mr. Inglis said. "They are going to have much more substantial backing than they had. That will give them opportunities."

Private equity company interest in insurance distribution first took off about 18 months ago, said Robert J. Lieblein, a managing principal at WFG Capital Advisors in Harrisburg, Pa. They typically obtain funding from large institutional investors, retirement funds, or banks looking to diversify and on average hold an acquisition for three to seven years.

Private equity firms often acquire companies that, like wholesalers, have strong cash flow potential, said John Wicher, principal at San Francisco-based John Wicher & Associates. They can use the cash flow to fund other acquisitions.

Their influence will help finance independently-owned wholesalers who will emerge as a new driving force in the acquisition of smaller wholesale operations, he said.