Assurant Inc.'s planned acquisition of the Warranty Group next year will give Assurant a larger presence in the market and better position both companies for the future of auto retail, their executives say.
The Warranty Group provides F&I products and training services to about 5,300 dealerships across the U.S. When the acquisition is complete and the businesses are combined, Assurant will protect 36 million vehicles, nearly triple its current number, and will work with nine top global manufacturers, Keith Demmings, president of global lifestyle at Assurant, told Automotive News.
The automotive business will make up 20 percent of the company's revenue, Demmings said. Automotive now accounts for 12 percent of Assurant's revenue and 66 percent of the Warranty Group's, he said.
The deal, worth $2.5 billion, including the Warranty Group's debt, is expected to close in the first half of 2018.
The Warranty Group has been owned by private equity firms for 13 years, including TPG Capital since 2014.
"When you're owned by private equity, you never feel like you're home. You have financial buyers that you know are going to own you for four or five years and then sell you. That's more of a tactical management structure vs. a strategic one," said Charlie Robinson, COO of Resource Automotive Group, a division of the Warranty Group.
"When you become part of a Fortune 500 company, like Assurant, who is a strategic buyer, it's much more about improving your services and building the short-, medium- and long-term future."
Assurant is headquartered in New York. The Warranty Group will continue to operate the dealership business in Chicago. The Warranty Group CEO Nelson Chai will join Assurant's board, and Assurant CEO Alan Colberg will continue to lead the company.
Both companies have third-party administrator businesses, but only the Warranty Group has direct relationships with dealerships.
"This definitely brings a huge focus on the direct-to-dealer business that they've enjoyed," Demmings said. "It brings together two leaders in their respective distribution channels. We certainly want to maintain the relationships on both sides of what we're supporting collectively today."
The company will continue to run Resource Automotive, which works directly with dealerships, separately from the third-party administrator programs, he added.
At the dealership level, little will change, Robinson said. "One of the things we really stress with our dealer clients is continuity. If they should expect to see any changes, it would be improvements as we move forward. But the first thing we want to do is make sure we continue to be as successful as we have been in the last several years and not change a lot of what is working well today. When we see opportunities to change things for the better, we will."
Assurant and the Warranty Group have a "look-alike culture," he added. "If somebody said to me, 'Give me the top three companies you would like to see own us,' Assurant would have been No. 1. It's more than the right thing to say it's a perfect match."