Kroll Sold To Former MMC Chief Executive

NU Online News Service, June 7, 11:13 a.m. EDT

Marsh & McLennan Companies Inc. is selling its risk consulting subsidiary, Kroll, to Mike Cherkasky, the former chief executive of both Kroll and MMC, in an all-cash deal valued at $1.13 billion.

The sale of Kroll, acquired over six years ago by MMC, has been rumored for months.

As recently as May, Brian Duperreault, president and chief executive officer for MMC, said he had no intention of breaking up MMC with regard to its insurance (March and Guy Carpenter) and consulting segments (Mercer and Oliver Wyman).

However, he said nothing at the time to squelch rumors that there were plans to sell Kroll.

Meyer Shields, an analyst with Baltimore-based Stifel, Nicolaus & Company Inc., called the move a good deal for MMC, noting that Kroll never really fit with MMC's insurance and consulting business. (In the interest of disclosure, Stifel, Nicolaus has banking interests with MMC.)

"When you get rid of a business that is a distraction--in other words, when the CEO of Marsh had to keep track of what was going on in this industry, there was no real synergy--I think that's a positive," said Mr. Shields. He noted that the price makes sense and is in line with earnings expectations.

One positive from the deal for MMC is that with its plans to acquire independent agencies through its Marsh & McLennan Agencies subsidiary to become a bigger player in the small to mid-size account market, "cash will be particularly helpful," said Mr. Shields.

The deal is subject to regulatory approvals and other customary closing conditions, New York-based MMC and Altegrity (an international screening and security solutions company headquartered in Falls Church, Va.), said in a joint statement.

The transaction is expected to close by late September.

"Over the past six years, Kroll has been a valued member of the MMC family," said Mr. Duperreault in a statement today. "However, we have determined our long-term strategy is to focus on the Risk and Insurance Services and Consulting businesses. Altegrity, with its complementary practice areas and expertise, will be a superb partner with Kroll to help drive the continued success of Kroll's businesses and people."

"Our clients look to Altegrity for information and insight to make smarter decisions," said Mr. Cherkasky, Altegrity's CEO. "The combination of Kroll and Altegrity broadens our capabilities with the addition of a portfolio of industry-leading services to help clients identify and manage risk. Altegrity and Kroll will leverage their combined resources to develop new and innovative solutions for government and commercial clients across a global platform."

Mr. Cherkasky was president and CEO of Kroll from 2001 to 2004, and served as president and CEO of MMC until 2008.

Ben Allen, CEO of Kroll, said the transaction represents new opportunities for the company, adding that the firm is "now poised to continue its historical track record of growth."

Altegrity is owned by Providence Equity Partners, a private equity firm specializing in equity investments in media, entertainment, communications and information companies.

Julie Richardson, a managing director at Providence and an Altegrity director, said that Providence has worked with Altegrity "to build a global leader in risk assessment and mitigation" and this acquisition is "the capstone to that effort..."