Asurion Corporation

648 Grassmere Park Drive, Suite 300
Nashville, Tennessee 37211
U.S.A.
Telephone: (615) 837-3000
Fax: (615) 837-3001
Web site: http://www.asurion.com

Private Company
Incorporated: 2001
Employees: 5,000
Sales: $700 million (2005 est.)
NAIC: 517212 Cellular and Other Wireless Telecommunications

Asurion Corporation is a leading provider of service programs to the wireless industry, offering roadside assistance services, handset insurance services, warranty management, equipment maintenance services, and debt protection programs to more than 50 million wireless subscribers in the world. The company operates in North America and Asia, reaching its customer base through agreements with wireless carriers such as T-Mobile USA, Inc., Sprint Nextel Corp., Verizon Wireless, Cingular Wireless LLC, NTT DoCoMo, Inc., and Korea Telecom Freetel, Co., Ltd. Asurion operates customer-contact centers in Nashville, Tennessee; Evans, Colorado; Houston, Texas; Kansas City, Missouri; and Salina, Kansas. A repair and reverse logistics facility is located in Smyrna, Tennessee. Its Canadian operations are headquartered in Moncton, New Brunswick. The company's business in Asia is headquartered in Singapore and supported by offices in Korea, Japan, Taiwan, and Hong Kong.

ORIGINS

To a certain extent, the inspiration for Asurion's formation came from a lack of inspiration. The company's founders, Kevin Taweel and R. James Ellis, knew they wanted to lead their own business venture, but they balked at the prospect of forming a startup, in part because they had no idea about which specific type of business they might enter. Their solution to the problem was to put into practice the teachings of their graduate school mentor, H. Irving Grousbeck, professor of management at Stanford University's Graduate School of Business. In 1984, Irving developed the concept of a search fund, a tactic well suited for aspiring entrepreneurs with connections in the investment community. By soliciting the financial support of investors who contributed to a search fund, entrepreneurs could begin hunting for a company with good growth prospects. After the search was concluded, a second round of funding was secured to pay for the acquisition, giving the entrepreneurs control over a company whose market value they subsequently increased, giving the investors a return on their investment. "It takes unbelievable determination," an investor in search funds explained in the Summer 2006 edition of Business Week SmallBiz. "The mechanics of doing the deal are tricky, and there's a lot of competition. The actual search is like boot camp. It's nerve-racking, and the bank accounts get drained. It's lonely and long."

In the two decades after Grousbeck first developed the idea of a search fund, more than 70 funds were formed. One of the most successful enterprises spawned from a search fund was Asurion, a company founded by students of Grousbeck. Kevin Taweel earned his M.B.A. degree from Stanford in 1992, followed one year later by Jim Ellis. Taweel worked briefly as an investment banker and Ellis worked as a consultant before they formed a search fund in 1993 to pursue their dream of running their own company. "It seemed like a lower-risk approach to being an entrepreneur," Ellis explained in an August 2002 interview with Stanford Business Magazine. "The idea behind the search fund is that you're purchasing a successful, ongoing business." After raising the money to pay for their search, the pair began studying the towing business, embarking on a painstaking search for the ideal acquisition target. After submitting bids on 20 companies, Taweel and Ellis altered their search criteria and began focusing on the dispatch business. "That turned out to be a pretty good business for us," Ellis said in his interview with Stanford Business Magazine. "It's not as difficult; there aren't as many bad capital issues."

Taweel and Ellis's search ended in 1994 after they found what they hoped would be an ideal company for their purposes. They found a company in Houston, Texas, named Road Rescue, Incorporated. In 1987, Road Rescue created a service to meet mobile phone users' need for emergency, roadside assistance while in their cars. The company formed partnerships with wireless carriers, and charged subscribers $1.50 per month for battery jump-starts, tire changes, up to three gallons of gasoline, and locksmith services. By the time Taweel and Ellis set their sights on the company, Road Rescue had developed into a flourishing enterprise, serving 500,000 cellular phone subscribers in more than 50 North American markets. Taweel and Ellis submitted a bid for Road Rescue in 1994 and, after paying $8 million, became owners of the company the following year.

ACQUISITION OF MERRIMAC:
1999

An emergency roadside assistance program became the foundation of Taweel and Ellis's quasi-entrepreneurial venture. The partners intended to use the company to build a larger, more valuable company, one based on providing services to the wireless industry. When Taweel and Ellis entered the market for wireless services, there were ten million cellular phone subscribers in the United States, a figure that increased dramatically, rocketing to 159 million subscribers a decade later, as they expanded Road Rescue and added to its capabilities with other acquisitions. The partners struck again on the acquisition front several years after purchasing Road Rescue, acquiring The Merrimac Group, Inc. in 1999. Merrimac had developed the concept of insurance for the loss, damage, or failure of wireless equipment, giving Taweel and Ellis another dimension to their presence in the wireless market. Operating as "Road Rescue Merrimac" following the acquisition, the company used its expanded menu of service offerings to forge new agreements with wireless carriers, recording explosive growth as the number of cellular subscribers increased dramatically.

COMPANY PERSPECTIVES

Our services maximize revenue, support customer retention and improve the bottom line for our partners. Our programs are designed with the carrier and customer in mind, optimizing revenue for the carrier and providing "peace of mind" and value for consumers and enterprises. While saving users over $1 billion, Asurion has grown to be the North American leader in enhanced services for the wireless industry. Our philosophy is simple—be passionate about delivering quality services, develop programs that are easy to implement, provide more profit for carriers, and partner for the long term. We have a "pay for performance mindset." We only succeed when our clients do.

During their first years in business, Taweel and Ellis played an active role in the management of their company. Taweel served as chairman, while Ellis took care of the company's sales, marketing, and client relationships, presiding as chief executive officer. In 2001, the year the company adopted the name "Asurion," a new senior executive was hired to take day-to-day control over the company. Taweel continued to serve as chairman, while Ellis vacated his post as chief executive officer, passing the title to Bret E. Comolli, who joined Asurion in March. A fellow graduate of Stanford's Graduate School of Business, Comolli took command over a flourishing enterprise that had grown more than 500 percent in the five years preceding his arrival. Asurion's clients represented more than 85 percent of the wireless carriers in North America, including Verizon, Cingular, ALLTEL, and Bell Mobility, making the company North America's largest provider of roadside-assistance services and handset insurance to the wireless industry. In July 2001, the company's formidable presence was strengthened further when AT&T Wireless, one of the world's largest providers of cellular-phone service, selected Asurion to serve AT&T Wireless subscribers nationwide.

Comolli took the helm of a fast-growing company and began expanding its operations and range of services. Asurion's business in Canada was growing rapidly as Comolli moved into the company's headquarters in San Mateo, California, having increased in size roughly 300 percent since 1999. To serve its Canadian customers, Asurion maintained a facility in Toronto, Ontario, but the demands of a growing subscriber base were becoming too much for the facility to meet. One of the first initiatives directed by Comolli was to expand the company's infrastructure in Canada, a plan announced in September 2001 when the company revealed its intention to build a new call-center facility in Moncton, New Brunswick. The new, 10,000-square-foot facility was designed to accommodate more than three times the number of employees housed at the Toronto facility. Comolli also added to Asurion's assets in the United States during his first months in charge. In December 2001, he announced the establishment of Asurion's own repair and refurbishment center, a facility that was meant to augment the work performed by the company's existing network of third-party repair and refurbishment suppliers. The 50,000-square-foot facility was established in the Nashville suburb of LaVergne, Tennessee, and equipped to handle tasks ranging from minor case and battery repairs to more technical parts replacement, internal repairs, and testing.

INTERNATIONAL EXPANSION IN
THE EARLY 21ST CENTURY

Asurion was on the move in 2003, both at home and abroad. The company relocated its headquarters during the year to be nearer its support facilities in Tennessee, abandoning its San Mateo offices and moving to Nashville, where it had 600 employees stationed at a customer-contact center near its new repair and refurbishment facility in LaVergne. While the company moved into its new offices, Asurion representatives began laying the foundation for global expansion. A joint venture with Olympus Capital Holdings spawned Asurion Asia Pacific, a subsidiary charged with carving out a presence in a region boasting some of the highest mobile phone penetration rates in the world. Based in Singapore, Asurion Asia Pacific began spearheading expansion throughout the region, starting with Korea and Japan. By October 2003, the subsidiary had opened its third office in Asia, conducting the majority of its business with Korea Telecom Freetel, Co., Ltd., a leading wireless carrier with more than ten million subscribers in Korea.

Asurion's record of fast-paced growth continued unchecked as the company embarked on its second decade of business. A little more than a year after the company's move to Nashville was completed, its new facility could no longer adequately meet the demands of its expanding business. In May 2005, an additional 50,000 square feet was added to its headquarters facility, giving the company 132,000 square feet to house its corporate operations. Annual revenue was leaping upward as the company expanded its main offices, reaching $418 million in 2004, a 60 percent increase from the total generated the year before, and climbing to $517 million during the first nine months of 2005. Within the ensuing year, the company's financial might would increase substantially after it completed several acquisitions, returning to the mode of expansion that had formed its foundation during the 1990s.

KEY DATES

1993:

Kevin Taweel and R. James Ellis form a search fund to identify an acquisition target.

1995:

Road Rescue, Incorporated is acquired, putting Taweel and Ellis in business.

1999:

The Merrimac Group, a provider of insurance for wireless equipment, is acquired.

2001:

Road Rescue Merrimac changes its name to Asurion.

2002:

Asurion begins performing repairs on wireless equipment at a new facility in Tennessee.

2003:

Asurion expands into Asia.

2004:

Asurion moves its headquarters from San Mateo, California, to Nashville, Tennessee.

2006:

Asurion merges with DST Systems, Inc.'s Lock/line subsidiary, creating a $1 billion-in-sales company.

The beginning of Asurion's second decade of business was highlighted by a major merger. In October 2005, the company announced an agreement to merge with the Lock/line subsidiary of DST Systems, Inc., a more than $100 million-in-sales business that provided administrative services for extended warranty programs offered by telecommunications carriers. The merger, which was completed in January 2006, created a 4,500-employee company with projected 2006 revenues of $1 billion. The combined organization retained the Asurion name. Taweel and Comolli remained chairman and chief executive officer, respectively, and Lock/line's president, Chuck Laue, became president of Asurion's North American operations. The merger was followed by two acquisitions completed in mid-2006 that hinted at a more aggressive acquisitive stance in the years ahead. In May 2006, Asurion purchased Warranty Corporation of America, a provider of warranty and contract services to retail, manufacturing, and telecommunications customers. Based in Norcross, Georgia, Warranty Corp. maintained a warehouse and call center in Peoria, Illinois, and operated in international markets through subsidiaries based in Montreal, Canada, and Manchester, England. One month after completing the purchase of Warranty Corp., Asurion acquired Lumitrend, a developer of mobile software that performed data protection functions. Lumitrend's main product, Cell-Backup, automatically protected contacts, ring tones, pictures, and wallpapers stored on a cellular phone.

With the scope of its operations broadening nearly every year, Asurion was carving a lasting and instrumental place for itself in the ever expanding wireless industry. In the years ahead, the company's ability to anticipate and respond to the evolving needs of wireless subscribers would determine its success to a large degree. Based on the company's record of accomplishments during its first dozen years in business, it appeared well equipped to handle the demands of the future.

Jeffrey L. Covell

PRINCIPAL SUBSIDIARIES

Asurion Insurance Services, Inc.; Asurion Canada, Inc.; Asurion Asia Pacific; Asurion Road Rescue Inc.; Asurion Protection Services, LLC; Warranty Corporation of America.

PRINCIPAL COMPETITORS

American Automobile Association; Mondial Assistance (UK) Limited; Green Flag Limited.

FURTHER READING

Alexander, Meredith, "Wanted: A Company to Call Their Own," Stanford Business Magazine, August 2002.

Calvey, Mark, "TA Associates Sure About Asurion," San Francisco Business Times, April 6, 2001, p. 15.

"The CEO Fast Track," Business Week SmallBiz, Summer 2006.

Davis, Mark, "DST Makes Merger Plans," Kansas City Star, October 28, 2005.

Jackson, Bill, "Asurion Corp.," Greeley Tribune, March 14, 2006.

Kurdek, Robyn, "TA Finds Sweet Spot with Asurion," Private Equity Week, April 9, 2001, p. 3.

Neely, Esme, "Never Fear, Mr. Rescue Has Arrived in Baltimore," Baltimore Business Journal, February 5, 1993, p. 24.