September 10, 2012
Interviewed by: David Snow
Video Clip
Login to view full video

How ICM and Riverside Partnered for Growth

Private equity can indeed create jobs – just ask Ohio state officials, who worked with Insurance Claim Management (ICM) and the private equity firm that owns ICM, The Riverside Company, to open a new Springfield facility that now employs 160 people.

This impressive story is told by Paul Gross, President of Eau Claire, Wisconsin-based ICM, and Bill Seelbach, a former McKinsey consultant and now Senior Advisor to Riverside. Gross and Seelbach detail the formation of ICM as a spin-out from an existing Riverside portfolio company, the tax and other incentives that were agreed with Springfield and Ohio officials, the impact that the new facility has had on Springfield’s hard-hit economy, and how a local community college partnered with ICM to train a mostly manufacturing-oriented workforce to process insurance claims.

This program is one of an ongoing Privcap series on value creation in private equity.

Private equity can indeed create jobs – just ask Ohio state officials, who worked with Insurance Claim Management (ICM) and the private equity firm that owns ICM, The Riverside Company, to open a new Springfield facility that now employs 160 people.

This impressive story is told by Paul Gross, President of Eau Claire, Wisconsin-based ICM, and Bill Seelbach, a former McKinsey consultant and now Senior Advisor to Riverside. Gross and Seelbach detail the formation of ICM as a spin-out from an existing Riverside portfolio company, the tax and other incentives that were agreed with Springfield and Ohio officials, the impact that the new facility has had on Springfield’s hard-hit economy, and how a local community college partnered with ICM to train a mostly manufacturing-oriented workforce to process insurance claims.

This program is one of an ongoing Privcap series on value creation in private equity.

Privcap: ICM was born from an existing Riverside portfolio company. Can you explain the thinking behind your spin-out? 

Paul Gross, Insurance Claim Management: Our organization really didn’t exist by this name at that point in time. We were part of a different portfolio within Riverside’s portfolio. And Riverside really quickly identified that they could extract significantly greater value as a standalone portfolio company than a part of this other organization.

Bill Seebach, The Riverside Company: Well, Paul had a vision for ICM that was really serving our insurance clients with a very differentiated business model, both for auto glass claims and then later for water mitigation claims. And it just seemed to us that to really affect that vision, the company would be much better served to stand on its own and not have any of the constraints or some of the other orientation of the portfolio company of which it was originally part.

Privcap: What led the company to establish a new facility in Springfield, Ohio, and what has been the impact on the city’s economy?

Gross: I think what management and Riverside jointly recognized was that if we were really going to take that next step in terms of meaningful growth for the organization, that we had to have redundant facilities versus everything being managed out of our Eau Claire, Wisconsin office. So we worked closely together to develop the right plan for that and really work closely with the state and local government, work closely with one another and towards enacting that plan in a way that would allow us to be scalable and really position the company for future growth together. Two years ago, we didn’t have any jobs in Springfield, Ohio. Today we have 160 jobs in Springfield, Ohio. And we’re one of their largest new employers in the entire market.

Seelbach: Paul did a great job of negotiating a lot of incentives from the state of Ohio because this was a depressed area from an unemployment perspective, and the state was very interested in getting this facility located there. But it still is a major investment for the company and for Riverside, so we had a lot of good discussions on exactly how to portray that and be sure that this really made sense for everybody.

Gross: And that $2,500,000 investment into Springfield, Ohio not only created those 160 jobs which we believe will be 300 jobs in the relative near term. It also helped the company grow from– well, if you look at it from the point in time of carveout, the organization from a top line has grown by more than 168% and more than 500% from a bottom-line standpoint. So those things were largely possible as a result of opening the Springfield facility.

Seelbach: By about the third or fourth iteration, it became, I think, very compelling to everybody. And with Paul’s very good relationships and negotiations with local and state government, I think we ended up with a very attractive package for all stakeholders involved.

Goss: The interesting part of that is we really looked at what the state felt was– they kind of held their head low and said, geez, we’ve got all this unemployment and manufacturing it lost like 50% or 60% of their jobs in this local market in the 10 years prior to the recession. So they held their heads low that we’ve got this high unemployment number of quite a few vacant buildings in the downtown area.

So all these things that they looked at as a real detriment we looked at optimistically as saying, that means we’ve got large available workforce at our disposal. It means that we’ve got buildings that we get at economically viable lease rates, and things of that nature. It was really the proverbial situation of, is the glass half empty or is the glass half full? And it’s proved to work out very well for all parties in the process.

Privcap: But how did you train a manufacturing-focused workforce to work in an insurance business?

Gross: Really, I think that’s one of the great success stories that we have is that you have this large available workforce and high unemployment, but none of these folks really had the experience in insurance claims management, insurance adjusting, if you will. And so what we did is we partnered with the local community college. They actually flew up to our Eau Claire facility. They shadowed our best employees. They evaluated our training program.

And that community college then did all of the training for us. So they continuously produced new employees throughout the course of– this very week, we’ve got another class graduating. And we work very closely with them in the selection of those folks. If they pass the course at Clark State Community College, they’re guaranteed a job with us. We were very lucky to find a community college that really wanted to connect education to the economy in a real way that is fairly unprecedented across the country.

Privcap: How did the incentives offered by Ohio’s state government work?

Gross: They’re not just saying, hey, if you come and create X amount of jobs here, we’ll cut you a check. What they do is they have a state income tax and they say, for every job you create that enables us to generate more state income tax, we’re going to give you a percentage of the state income tax that we generate. So really when you look at it from a taxpayer perspective in Ohio, the taxpayers are getting paid to create these jobs. They’re not paying to have them created. So it’s a very innovative program that they put together in Ohio as well.

Privcap: Since both of you are Ohio natives, you must take great personal satisfaction at creating jobs in your home state.

Seelbach: Absolutely. We’re both very active in our communities, Paul in Columbus, me in Cleveland. I knew the head of the department of development before we ever approached them. Paul got to know them and got to know the people in Springfield. I think we’re both very, very happy to be able to do this in our own backyard.

Privcap: It seems like you two have a good working relationship…

Gross: Absolutely. I think that’s one of the really special things about Riverside is that they’ve got the breadth of experience, the operation experience that Bill brings to the table, so many positive attributes. You really work on each initiative together to get to a common goal. We’re all vested in terms of what our goals and objectives are and have a common view of the world from that standpoint.

Seelbach: Once upon a time, I was a partner in McKinsey and Company, and actually worked in their organization practice. So working with Paul on how to strengthen ICM’s organization was just great fun, and we enjoyed each other and managed to have a few drinks along the way. I think that’s the sign of a very good partnership.

Gross: I had to buy, though.

Register now to watch this video and access all content.

It's FREE!

  • CHOOSE YOUR NEWSLETTERS:
  • I agree to the Privcap terms of use and privacy policy
  • Already a subscriber? Sign In

  • This field is for validation purposes and should be left unchanged.