Following its recent mixed first half year results (see Innovation Group delivers 9% organic growth (update)), insurance-focused business process services (BPS) provider The Innovation Group is now looking to expand in continental Europe with the acquisition of Belgian claims management provider Value Partners N.V (VP). TIG is paying a potential €5.0m for VP, of which €2.5m is cash up front, with the rest paid in cash and shares if VP hits performance targets. VP employs 50 full time staff, and apparently handles some 500,000 inbound calls per annum in Belgium.
The rationale behind VP is simple enough – to get hold of new claims customers, which it then hopes will allow the existing Belgian business to grow its accident repair volumes. So it’s a relatively straightforward bolt-on aimed at cross-selling and up-selling opportunities. Nonetheless, buying out a claims partner is an expensive way to do this.
TIG's Belgian business sits with its Rest of Europe (RoE) division - TIG’s second smallest operation globally, which made £10.8m revenue in FY11 (up 9%) in motor BPO and networks. This figure also includes some revenue from the sale of motor parts for repairs, which is no doubt a low margin game. In fact in FY11, the EBITDA margin of the RoE division was half that of TIG overall at 5%. However at half time this had risen to 7%. TIG will need this acquisition to help get the RoE margin closer to the group average 10%.