Ryan Specialty launches $1.27bn IPO at $6.0bn valuation

Ryan Specialty Group Holdings (Ryan Specialty) has launched its IPO and said that pricing is expected to be in the range of $22.00 and $25.00 a share of Class A common stock, which at a midpoint of $23.50 would raise net proceeds of up to $1.27bn, or $1.46bn including additional grants to underwriters of the offering.

The midpoint price is also equivalent to a $6.0bn fully diluted market valuation for the wholesale broker and underwriting management specialist. The estimated net proceeds at the midpoint price is calculated after underwriting discounts and commissions and expenses.

The newly established Chicago, Illinois-based holding company for the intermediary said that it is offering 56,918,278 shares and intends to grant the underwriters of the IPO the right to buy up to an additional 8,537,742 shares.

JP Morgan, Barclays, Goldman Sachs and Wells Fargo are lead bookrunners on the IPO.

It intends to list its Class A common stock on the New York Stock Exchange under the symbol “RYAN”.

After the IPO, Ryan Specialty will be sole managing member of the existing Ryan Specialty Group LLC (RSG) and exclusively control all of its business and affairs.

In a statement, Ryan Specialty said it plans to use net proceeds from the sale of Class A common stock of $1.27bn – or $1.46bn if the underwriters choose to exercise their purchase option – to buy newly issued LLC units of RSG, buy out preferred stock in RSG held by PE firm Onex, and buy out other holders of outstanding LLC units in RSG.

According to the S-1 filing for the IPO, Ryan Specialty expects to own 106,488,770 LLC units representing a 41.7 percent economic interest in RSG, with the remaining economic interest held by holders of the remaining 149,162,107 LLC units.

Holders of Class A common stock will collectively own 100 percent of the economic interest of Ryan Specialty, and have a 6.7 percent voting power of the publicly traded company.

The LLC unit holders through ownership of Class B common stock will have the remaining 93.3 percent voting power in Ryan Specialty.

Founding chairman and CEO Pat Ryan and certain members of his family and other entities he and his family control will have 70.9 percent of the voting power of Ryan Specialty’s outstanding capital stock.

The offering is using the so-called “Up-C” structure which is often used by partnerships and limited liability companies underwriting an IPO, allowing potential future tax benefits for the public company and existing owners when they exchange their pass-through interests for Class A common stock.

Strong top and bottom line growth

As previously reported, Ryan Specialty’s S-1 filing reveals the significant growth seen at the wholesale distributor and underwriter.

Total net commissions and fees surged 34 percent last year to $1.02bn, including 32.4 percent growth to $673.1mn in wholesale brokerage, 38.9 percent to $131.9mn in binding authorities, and 36.6 percent to $211.7mn in underwriting management.

In the first quarter of 2021 there was even more significant growth as revenues surged $49.6mn to $311.5mn including the impact of its All Risks acquisition last year. Its Q1 2021 revenue included organic growth of 18.4 percent.

The filing also shows that in 2020 the company reported adjusted Ebitdac of $293.5mn, and an adjusted Ebitdac margin of 28.8 percent. In 2019, RSG posted adjusted Ebitdac of $191.4mn and an adjusted Ebitdac margin of 25 percent.