Henrico-based Markel looks to invest in privately held companies

Markel Corp. has been patient for the past four years, but the specialty insurer now is looking to make a bigger plunge in what it thinks of as the "patient equity" market.

That's the term some executives at the Henrico County-based company use for their ventures into the private equity market -- buying into privately held companies, an investment many other insurers avoid.

"We've patiently waited, and now we are seeing the opportunity we were waiting for," Executive Vice President Thomas S. Gayner told Wall Street analysts this week.

He said Markel believes there are good values available acquiring controlling stakes in private companies, and financing their plans to expand their businesses.

Markel executives call it the patient equity market because they believe in very long-term investments in such companies.

Often, when professional investment managers buy into a private firm, they are looking to get out with a profit in roughly five to seven years' time, Gayner said. Markel's plans call for a permanent place.

Last week, Markel quietly announced it acquired a private Texas company, Panel Specialists Inc., that makes panels, wall systems, casework, furniture, and countertops and other stone-related products. Terms were not disclosed.

As of Sept. 30, Markel had valued its private-equity investments at $76 million.

Markel first dipped its toe in the private company market in 2005, by acquiring a majority stake in AMF Bakery Systems, a Richmond-based manufacturer of high-speed equipment for large bakeries.

"It's been a great business," Markel Chairman and Chief Executive Alan I. Kirshner said recently. "They sell their equipment all over the world."

But after the AMF venture, prices for stakes in privately held firms got too rich for Markel, Gayner said.

It wasn't until 2008 that Markel resumed buying private companies when it acquired a 40 percent stake in First Market Bank and a controlling interest in a mobile-home park operator. First Market Bank, mostly owned by the Ukrop family and Ukrop's Super Markets Inc., is merging with Union Bankshares Corp. in a deal that should be completed in early December.

Kirshner said he feels Markel -- which traces its roots to a small, family-owned insurance company -- has a special affinity for tightly controlled companies that need capital to grow.

In 1986, when two grandsons of the company's founder and Kirshner took Markel public, it had revenue of just $10 million a year. Now, it takes in more than $2 billion in premiums.

"Here's how to think about it," Gayner said. "When I was down in Texas, one of the people there came up, shook hands and said he was the first person that company hired, 25 years ago. Then he introduced me to the second guy hired. Still there. That's the kind of company we invest in."

Contact David Ress at (804) 649-6051 or .