(SquareTrade offers warranty protection for consumer products such as electronics. Image credit: Adobe Stock.)
Allstate (Northbrook, Ill.) has committed to acquire SquareTrade (San Francisco and London), a privately held provider of consumer protection plans that distributes through major retailers. Allstate will pay approximately $1.4 billion to a group of shareholders including Bain Capital Private Equity and Bain Capital ventures, in a transaction expected to close Jan. 2017.
“Allstate’s consumer-focused strategy of providing unique products will be further enhanced with the acquisition of SquareTrade,” comments Tom Wilson, chairman and CEO, Allstate. “This acquisition expands Allstate’s customer relationships with 25 million protection plans for consumer electronics and connected devices.”
Wilson notes that SquareTrade enjoyed a four-fold increase in revenue during the last five years, which he attributes to exceptional customer service, innovative product design, analytics and supply-chain logistics. “The SquareTrade team under Ahmed Khaishgi has built strong relationships with major retailers, including Amazon, Costco, Sam’s Club, Target, Staples, Office Depot and Toys “R” Us, and further expands our customer reach,” he adds.
Joining Allstate will enable SquareTrade to expand into new markets beyond the founder’s expectations, according to CEO Khaishgi, who started the company along with Steve Abernethy.
“We put customers first and provide them the peace of mind that if their television, cell phone or computer breaks, SquareTrade can get them back to normal so they can stay connected with the world,” Khaishgi comments. “With Allstate, we will gain a broad set of capabilities enabling us to further leverage our distribution, brand and team, while retaining our entrepreneurial spirit.”
Right Step for Startup
Bain Capital’s managing director Phil Loughlin characterizes the deal as exactly the right step for SquareTrade. “It has been a privilege to help SquareTrade scale, innovate and disrupt a $20 billion industry, and we look forward to seeing its continued success,” he says.
Allstate reports that it will acquire SquareTrade with corporate cash and debt issuance, subject to market conditions, with no impact on Allstate’s existing share repurchase program. The insurer expects the transaction to be dilutive to its earnings per share for three years, including the amortization of intangible assets.
Ardea Partners, Lazard and Willkie Farr & Gallagher advised Allstate on the transaction, while Financial Technology Partners and Ropes & Gray advised SquareTrade.