Allstate Invests $1.4b in Consumer Protection Plan Startup SquareTrade

The acquisition will help the rapidly growing startup to continue its mission of disrupting a $20 billion dollar industry, according to one of its original investors.

(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.

Tom Wilson, CEO, Allstate.

Tom Wilson, CEO, Allstate.

“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.”

Rapid Growth

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.

Ahmed Khaishgi, CEO, SquareTrade.

Ahmed Khaishgi, CEO, SquareTrade.

“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.

Encompass Taps Allstate’s Drone Partner for Aerial Images of Customers’ Homes

Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

Leave a Comment

(required)