Changing owners is old hat for longtime employees at Mitchell International, so the one just announced won’t be that different, its chief executive said.
Earlier this month, publicly owned New York investment firm KKR & Co. LP agreed to buy Mitchell International, which makes software for the automobile repair and auto insurance industries and is one of San Diego’s largest private companies, from Aurora Capital Group, a Los Angeles private equity firm.
“I don’t imagine things will change much at all,” Mitchell CEO Alex Sun said, noting that KKR (NYSE: KKR) will be Mitchell’s third private equity owner. “We’ve gone through this ownership change before, and we’re comfortable with it.”
While terms of the agreement weren’t released, published reports estimate Aurora obtained $1.1 billion, essentially doubling the price it paid for Mitchell when it acquired the business in 2007 from Hellman & Friedman, a San Francisco private equity firm.
Sun declined to comment on the reported price, except to say that the sale “was a positive outcome” for Aurora Capital.
Aurora, like most private equity firms, generally holds companies in its portfolio for five to seven years, helps to grow the businesses, then sells them and deploys the profits into other businesses.
Nikhil Varaiya, a finance professor at San Diego State University, said Aurora obtained a good price for the business and that KKR will likely do the same in five to seven years.
“At the end of the day, KKR will try to sell the company in a few years or, if not, take it public,” Varaiya said.
Sales Up as Scope Expands
Mitchell, founded in 1946, has been ratcheting up sales at double-digit rates during Aurora’s stewardship. Last year, it was ranked No. 4 on the San Diego Business Journal’s list of the largest private companies based on its 2011 revenue of $312 million, up 17 percent from 2010, according to data provided by the company. Also, it was ranked No. 4 on the Business Journal’s 2012 list of software companies, ranked by number of employees, with 816 workers in May 2012.
Sun declined to disclose the company’s sales in 2012, but he said Mitchell is on track to generate $350 million to $400 million this year.
Of the company’s 2,000 employees, about 900 work in its University City headquarters. The majority of them are engineers and product managers, but they also include service-oriented personnel, field workers, trainers and call center workers, Sun said.
The software Mitchell makes helps auto repair shops and insurers to better estimate the costs of vehicle repairs, and the company has expanded in the past decade to include software aimed at medical injury claims and resulting workers compensation claims management.
“This has been a successful and growing part of our business and now makes up the majority of our revenue,” Sun said.
Auto Repair Software Hub
The company was started by Glenn Mitchell, an auto parts manager for a local car dealer, who saw a need for providing a manual of parts to car repair shops. The lists were printed in the beginning and evolved to being available on CD-ROMs; today, they’re delivered entirely through online channels.
Mitchell said its software enables tens of millions of transactions each month for more than 30,000 repair shops and about 300 insurance companies, including most of the top 25 carriers.
San Diego has become a hub of sorts for software firms catering to the auto repair industry. Solera Holdings — a combination of businesses including Audatex, a claims processing firm — went public in 2007 and was based here. In 2010, Solera moved its headquarters to Westlake, Texas, but maintained its AudaExplore unit here that has about 160 employees.
In 2008, Mitchell and a key competitor, CCC Information Systems, agreed to merge, but federal regulators raised antitrust issues, killing the deal.
In its statement on its agreement to buy Mitchell, KKR said it had $83.5 billion in assets under management and more than $9 billion invested in technology. KKR, formerly known as Kolberg Kravis & Roberts, ranked fourth largest globally in capital raised with $28.4 billion, according to a ranking by trade publication Private Equity International. It trailed only TPG Capital, The Carlyle Group and the Blackstone Group.
Aurora Capital said it manages about $2 billion in several funds. The firm’s chairman is Gerald Parsky, a resident of Rancho Santa Fe and longtime Republican financier. In 1996, Parsky was chairman of the Republican National Convention Host Committee in San Diego, and he was chairman of President George W. Bush’s California fundraising in 2000 and 2004.