Rob Terry, founder and former executive chairman of claims-handling giant Quindell, has invested £750,000 in a claims management joint venture, it has emerged.
Details of the new project are contained in the annual report for Mr Terry’s “digitally disruptive technology-based business” OS3, which its website says is “targeting a £1bn+ initial valuation” by 2022 and includes details that make it sound similar to Quindell.
With turnover from its IT products of £4.2m and profit before tax of £3.1m, the report said OS3’s first investment, valued at £750,000, was to obtain 50% of a joint venture under its ‘Care Approved’ brand, which will “target a segment of the UK claims market”.
The report went on: “This segment of the market is expected to remain extremely profitable and unaffected by current planned regulatory changes.
“The JV is currently documented in an exclusive heads of terms with full contracts due to be completed before the end of November 2018.
“It will operate with a subsidiary which is already established as a regulated claims management company and will utilise technology from OS3 and third-party solutions to provide a cloud-based platform to digitally link various elements of the claims supply chain, improving both the efficiency and effectiveness of the claims process.”
The report noted how the founding directors of OS3 – all of whom used to work at Quindell – created “a successful methodology for acquiring businesses, used during their previous ventures, combining future warranted profit before tax at a premium to the then prevailing share price value, alongside potential clawbacks to protect investors, whilst also aligning all parties’ interests.
“This methodology has been key to enabling us to cost effectively acquire our investments within a short period of time.
“This method avoids certain pitfalls associated with typical merger & acquisition transactions, whilst also allowing OS3 to potentially benefit from the significant levels of future growth and accretion associated with incubation phase companies.”
Mr Terry built Quindell to be a company that could offer insurers all the elements needed to handle a road traffic accident claim on an outsourced basis.
He resigned from Quindell in November 2014 over a controversial share sale and repurchase deal that destabilised the company’s share price, removing more than half of its value in little more than a week.
Quindell sold its the professional services division to Slater & Gordon the following year in a deal that is now the subject of High Court litigation.
Shortly afterwards, the Serious Fraud Office opened a criminal investigation into “business and accounting practices” at Quindell in the wake of a restatement of its 2013 accounts that turned an £83m profit into a £68m loss. The investigation continues.
The OS3 report set out targets for income growth for the joint venture, rising from £12m in the first year or two to £24m after three or more years.
However, much bigger profits were predicted if OS3 was to employ “The Waterfall Effect”, described as “deriving revenues from owning key elements of the supply chain for a particular process” – a strategy that sounds similar to that employed at Quindell.
If OS3, using funding of between £6m and £12m for working capital, exploited The Waterfall Effect, the report predicted total combined revenues of around £70m in the short-term, £110m in the medium term and £140m in the longer term.
Care Approved is the brand for OS3’s consumer sales, service and broking based operations.
“These will include offerings in insurance, telecoms, utilities, health, and others, as well as key areas of their related supply chains such as property and auto insurance claims.
“These offerings will lead into the provision of services either directly or indirectly for Care Approved would combine offerings that provided services for: accident helplines (consumer support services such as claims management companies), vehicle repair (body shops), vehicle hire (credit hire services), medical reports (doctors), rehabilitation services (clinics) and legal services (lawyers) as applicable in each territory in which the Care Approved brand will operate”.
The report said the Care Approved brand was currently used for OS3’s “service offering in America” as well as “certain claims segments” in the UK.
The report revealed that 68.7% of the shares in OS3 are owned by Mr Terry and his wife Louise.
By 2022, OS3 intends to start making distributions to its investors via dividends,
or a partial initial public offering (IPO) of the business, or through a full IPO in North America.
The company is based at Mr Terry’s Quob Park estate in Hampshire. The report said the company’s name changed from Quob Park Estate to OS3 “shortly before publishing these accounts” last month.
Mr Terry also has a Quob Park vineyard, selling Quob Park Premiere Cuvée Rose Millésime 2018 for a pre-order price of £100, a 50% discount on the full price.