PCF Insurance Services - A 5X, Utah-based "Unicorn" Hiding in Plain Sight - Lands $400 Million in Incremental Debt Financing

The funding will be used by PCF to "accelerate (its) M&A strategy," a strategy that helped the Top 20 insurance brokerage complete nearly 100 partner transactions during 2022.

Lehi, Utah-based PCF Insurance Services has just closed $400 million in incremental debt financing, funding designed to allow the firm to "accelerate (its) M&A strategy."

PCF is a Top 20 insurance brokerage in the United States, a firm that saw significant growth in 2022 by completing nearly 100 partner transactions during the year and hitting $700 million in revenue in calendar 2022.

According to this week's news release announcing the transaction, the deal was "... led by Blue Owl, a global alternative asset manager that acted as lead arranger and admin agent (of the financing)."

PCF was formed in 1987 in southern California as Peter C. Foy & Associates Insurance Services.

Today, PCF offers Commercial, Employee, Medicare, Personal, and Specialty insurance coverages for businesses in 15 industries, namely

1. Cannabis,
2. Construction,
3. Contractor,
4. Education,
5. Entertainment,
6. Farming,
7. Financial,
8. Healthcare,
9. Hospitality,
10. Legal,
11. Manufacturing,
12. Professional Services,
13. Real Estate,
14. Sports, and
15. Transportation.

According to a 23 March 2023 writeup by Insurance Business, PCF's "... top performers (by industry) are ... transportation, trucking, construction, real estate, agriculture, and ranch insurance."

Although the financing announced this week was initially targeted at $300 million, PCF says lender interest was so high it agreed to bump the total transaction amount by a third to $400 million.

According to Felix Morgan, Chief Financial Officer, Chief Operating Officer, and Board Member of PCF,

"The oversubscription in the financing and upsize in deal speaks to the strength of PCF and the confidence that our investors have in our bright future and ability to deliver on our long-term, strategic growth objectives."

PCF Insurance Services: A "Brief" Overview of its Recent Growth

In reality, there is little information on the Internet about PCF from its formation in 1987 to 2017.

But 30 years after its launch, PCF accepted "a material investment" from New York-based BHMS Investments in early 2017. Terms of the transaction were not disclosed.

Then, three years later, California-based private equity firm, HGGC, announced in April 2020 that it had acquired majority control of PCF, with BHMS, PCF management, and various PCF employees maintaining minority ownership positions. Again, terms of the transaction were not disclosed.

That said, at the time of the HGGC acquistion, PCF had

• Acquired 18 independent insurance brokers (during the 15-month-period from the end of 2018 through March 2020);
• Grown to over 400 employees across the U.S.;
• Served more than 40,000 customers; and
• Had grown into one of the top 75 insurance brokers in the U.S.

Next, 19 months later, PCF announced it had completed a management and partner-led buyout from HGGC, a transaction that valued PCF in November 2021 at over $2.2 billion.

This transaction, including financing of more than $1 billion by Owl Rock, was led by PCF's Chief Executive Officer, Peter C. Foy, along with the firm's executive team, with HGGC maintaining a minority position in PCF.

Since the initial HGGC transaction in April 2020, PCF had been on an acquisition tear, with

• Over 100 partner transactions, while
• Growing into a Top 20 Insurance Brokerage,
• With over 1,700 employees, and
• Anticipated 2021 revenue of nearly $400 million.

But ... did PCF slow-down? LOLOLOL!!!

In February of this year, PCF announced it had accepted a $500 million preferred equity investment co-led by Carlyle Group's Global Credit platform and HGGC, with minority participation in the deal by Owl Rock and Crescent Capital, both of which already had minority equity positions in PCF.

This transaction valued PCF at $4.7 billion, an increase in market capitalization of over 4.7X, in 16 months. Not bad at all.

It also means that on a pre-money valuation, these investment partners acquired slightly more than 10.6% of PCF for their $500 million.

So ... what drove the valuation growth of PCF in such a short time frame?

Again, it was a series of acquistions, coupled with 10% Year-over-Year organic growth.

Specifically, between November 2021 and February 2023, the date of this particular $500 million investment, PCF had transformed itself into what it now says is a "risk management, benefits design, and insurance brokerage services company."

As such, PCF had

• Grown its network by nearly 100 partner organizations (most of them acquisitions),
• Increased its 2022 revenue to over $700 million, up from roughly $400 million for 2021, by
• Increasing its system-wide "Book of Business" to over 415,000 clients.

PCF Insurance Services: The 5X Unicorn Hidden in Plain Sight

All of which brings us to this week's announcement of PCF's new $400 million "incremental debt financing," a financing designed specifically to help the Top 20 insurance brokerage "fund near term acquisitions and ... support mergers and acquisitions (M&A)."

From data on its website, and as shown in the graphic below, PCF now has

• Over 275 locations across the United States, supporting
• Nearly 200 insurance brokerage companies in its national network.

And this new $400 million in "pocket change?" LOL

It's all about growing bigger and bigger.

And in my mind, I suspect it's all about doing so as fast as PCF can make it happen.

So ... what does this all mean?

Given its track record over the past six-plus years, back when PCF accepted that "material investment" from BHMS Investments, I am quite confident that PCF has NOT slowed down.

In fact, based upon my review of PCF news announcements since the beginning of 2023,  I am confident in suggesting that PCF's corporate valuation now exceeds $5 billion, which, of course, would make it a mythical "Unicorn" company five-times over.

Yes, a 5X Unicorn!!! 🤯 🤯 🤯

{AUTHOR'S NOTE: Yes, I'm quite aware that the Unicorn moniker is typically handed-out to venture capital backed startup companies, neither of which applies to PCF, at least not from what I can determine. Nevertheless, I believe the designation applies, so I'm gonna use it.}

Continuing on ...

My guess is that unless someone living in Utah works in the insurance or investment industries, chances are they've never even heard of PCF.

But not any more.

Sorry, PCF:

"The cat's out of the bag."