The Uncertain Future of Luko: Insurtech Startup Faces Liquidation as Admiral Group Abandons Takeover

For Luko, all’s well that ends well, we wrote last June. At least, we thought… At the time, the founders of the insurtech thought they had saved the furniture by announcing the takeover of the company by the British insurer Admiral Group. With an agreement worth around 14 million euros to save Luko’s French activities, most of the financial storm in which the French startup was plunged seemed to be behind it.

However, a resounding turn of events occurred this week, since the buyer Admiral Group simply decided to give up on getting its hands on Luko, according to the revelations of Insurance Argus. A turnaround in the situation which comes at the worst time for the online home insurance specialist since its safeguard procedure will end on November 7 before the Bobigny commercial court. The founders of Luko therefore have around ten days left to find another buyer, otherwise it would risk being faced with liquidation which could put its 180 employees out of business.

A fatal market reversal in 2022

To understand how Luko found himself so close to the precipice, we have to go back in time a little. Let’s return in particular to December 2020 when the company announced a funding round of 50 million euros which whetted its appetite to conquer Europe, a year after having already raised 20 million euros. The French insurtech, which has raised a total of 72 million euros since its creation in 2016, seems to have free rein to continue a rise in power which will materialize in 2022 with the takeover of its German competitor Coya which has enabled it to to officially obtain insurer status, then the acquisition of Unkle, a French startup which works to protect owners against unpaid rent.

But after this prolific first quarter of 2022, the dream scenario turned into a nightmare over the months. And for good reason, the macroeconomic climate has deteriorated significantly and central banks have not hesitated to suddenly increase interest rates to counter galloping inflation. Bottom line: it’s the end of “free and unlimited” money in tech. Therefore, investors have asked the startups in their portfolio to reduce their expenses to cope with this difficult period.

The failure of the C series put Luko up against the wall

To give itself some air, Luko tried to complete a Series C of around 100 million euros at the end of 2022, but the operation fell through, indicates Insurance Argus. However, the failure of this operation triggered a clause which was to force Luko to pay 12 million euros to Unkle shareholders as part of the acquisition of the company. But the problem was that Luko was in deficit and having drawn heavily on its cash flow to finance its external growth, the French insurtech found itself unable to reimburse Unkle shareholders.

Faced with this situation which was becoming untenable, Luko being in debt to the tune of 45 million euros, the company ended up rescheduling its due dates with its shareholders and creditors as part of an accelerated safeguard procedure before the commercial court of Bobigny. And when the British insurer Admiral Group came forward to take over the company last June, Luko’s founders thought they had done the hardest part to avoid a dramatic exit.

BNP Paribas and the loan of discord

However, there is one small detail that derailed everything in this well-oiled plan. And for good reason, BNP Paribas had granted a loan of around 1 million euros to Luko in April 2022. However, this loan would be at the origin of the withdrawal of Admiral Group from the takeover process, assures Insurance Argus. Indeed, the specialized media indicates that the bank contested the safeguard procedure initiated in September, arguing that it should be reimbursed as a priority ahead of other major shareholders, such as Triple Point Capital.

This blocking point would thus have led to the failure of the validation of a new plan to reschedule Luko’s debt that the company hoped to obtain on October 4. Consequently, the founders of Luko find themselves with their backs against the wall and are engaged in a race against time to find a new buyer urgently by November 7. According to Insurance Argus, insurers such as Axa, Allianz, Generali and Wakam would have been approached in this direction. But the latter could be tempted to wait for a possible judicial liquidation to recover at a lower cost the 500,000 home insurance contracts in the balance. Still, the final fate of Luko should be followed with great attention in the ecosystem, while the company had been able to position itself as one of the spearheads of the digitalization of home insurance.