The proposed takeover of the 178-year-old mutual LV is a profound embarrassment to Bain Capital. Private equity disdains publicity. That’s what the ‘private’ in the name is all about.
The lousy deal for LV customers focuses attention on the worst of private equity practice, including the tax-advantaged way in which partners are rewarded, job losses and a short time horizon, which is a total mismatch for endowment and pension policyholders.
Of equal concern to Bain Capital ought to be the personnel who have led LV members to the precipice.
Horizon scandal: During his stewardship of the Post Office LV chairman Alan Cook oversaw the wrongful prosecution of 161 postmaster and postmistresses
The disclosure by this paper that during his stewardship of the Post Office Alan Cook oversaw the wrongful prosecution of 161 postmaster and postmistresses is devastating.
How he has been resurrected as chairman of LV, and thus in charge of the life-savings of 1.2m investors, is inexplicable.
Cook’s job at LV ought to have been to protect the interests of policyholders and to have reined in chief executive Mark Hartigan’s personal ambition.
Hartigan could possibly collect millions under the new ownership while members receive a paltry £100 uplift.
LV members are being asked to sacrifice ownership and the long run security of their savings for a mess of pottage. It is a last chance saloon for LV customers.
They are in a position to settle their own fate by voting down the proposed LV deal online, or by post, up to December 8 or at the scheduled meeting two days later.
Policyholders should recognise the benefits of community ownership, which is demonstrated by mutual firms such as the Nationwide.
While other UK banks are shuttering scores of branches under cover of the pandemic, Nationwide has re-empowered them by connecting branch staff directly to customers. Whatever the outcome of the LV vote, there ought to be one certainty.
If the top team fails in its attempt to demutualise, Cook and Hartigan will have no choice but to resign.
Should Bain Capital win the vote, it must recognise the best way to avoid damage to its reputation is to realise Cook and Hartigan are damaged goods and fire them.
Minding the gap
A feature of the never-ending pandemic has been the surge in savings balances to over £200billion and a rise in citizen investing sparked by social media.
In this context, the discovery of retail investor platforms by Abrdn marks a fork in the road.
It previously had focused on marketing to institutional clients and through independent financial advisors.
The purchase of Interactive Investor for £1.5billion gives it instant access to 400,000 customers and £55million of assets. The deal will be funded from cash reserves and debts.
After the Hargreaves Lansdown (HL) debacle, when more than one-third of its retail investors were exposed to Neil Woodford’s investment empire, regulators will want to be sure proper Chinese walls are erected.
The fate of Interactive Investor is fascinating because of what it says about access to equities and funds. It sets up a battle for customers with other platforms including AJ Bell and HL.
The key to winning custom will come down to lowering commissions. In the US there has been a rush to the bottom illustrated by Robin Hood.
Costly investment in newer, faster and more secure tech platforms will be part of the game.
The bigger question is whether HL and AJ Bell can stand alone if current fat margins are eroded over time. Lloyds is aiming at the higher net worth investor through an alliance with Schroders.
It recently took aim at the retail investor through the purchase of Embark. The Lloyds and Abrdn deals could be the spark for further action in the same space.
Jurassic Park, as investor Paul Marshall dubs the City, has claimed another victim.
Specialist provider of critical medicines Clinigen finds itself at the end of a potential £1billion bid from private equity outfit Triton.
It is another example of mispricing by existing investors as the shares soared by 22 per cent.
Activist investors Elliott spotted the underlying value and snapped up 5 per cent earlier this year.
In addition to pouring out documents on governance maybe it is time for British long funds behind the Investment Association to ask members why they take such an unhelpful view of UK innovators.