LSL has revealed a joint venture with Pollen Street Capital (PSC) to launch Pivotal Growth, a national mortgage broker.
At least £200m will be made available by way of equity and debt to fund acquisitions; LSL has committed up to £33.5m and PSC up to £62.4m to support the acquisitions to be made by Pivotal Growth.
The investment by LSL and PSC will be supplemented with external debt finance in Pivotal Growth, with a view to an exit event over a three to six year period.
The LSL board has agreed to Embley investing up to £4m alongside PSC and LSL for a 4.4% share in the business, to align his interests with LSL shareholders and as a demonstration of his strong belief in the potential of Pivotal Growth.
Embley will stay on the LSL board as a non-executive director, allowing the group to continue to benefit from his knowledge and experience.
Bill Shannon, currently deputy chair and senior independent director, will become chair of the LSL board and chair of the nominations committee.
David Stewart, group chief executive of LSL, and Ian Gascoigne, partner at PSC, will be directors of Pivotal Growth.
Jane Cross, previously chief risk officer of the group’s PRIMIS network and managing director of its e.surv surveying business, has been appointed chief operating officer.
David Copland, previously LSL’s director of mortgage services, will be the strategy and business development director.
Pivotal Growth will use the technology of the recently acquired Mortgage Gym and Direct Life & Pensions businesses which offer solutions for the mortgage and protection markets respectively.
The new business has also entered into a long-term arrangement with PRIMIS, with all acquired businesses anticipated to become PRIMIS members, leveraging the network’s scale and existing position in the mortgage and protection markets.
Stewart said: “The launch of Pivotal Growth marks a significant milestone in the implementation of the group’s strategy.
“It follows other significant recent announcements, including the steps we have taken to strengthen our management team and recent acquisitions of Mortgage Gym and Direct Life & Pension Services.
“The establishment of the Pivotal Growth joint venture with Pollen Street Capital will enable us to establish a leading position in the provision of direct-to-consumer advice and underpins the pre-eminent position of our PRIMIS network.
“I look forward to describing our plans further when we release our preliminary results on 28 April.”
Ian Gascoigne, partner at Pollen Street Capital, added: “We are highly enthusiastic to support Simon Embley and his team in the launch of Pivotal Growth.
“Pollen Street has an extensive track record of backing successful buy-and-build platforms in UK financial services, most recently with Specialist Risk Group in commercial insurance broking, Kingswood in wealth management, and with foreign exchange platform Foreign Currencies Direct.
“We believe that LSL’s unrivalled experience and expertise in the financial and property services markets and Pollen Street’s extensive capabilities in investment and business transformation, form the basis for a highly successful partnership.
“While large and long established, the UK mortgage broking market remains highly fragmented, offering significant potential for synergistic consolidation.
“We believe that Pivotal Growth has potential to quickly become a market leader, while delivering pioneering levels of innovation and the highest standards of customer service in the industry.”
Martin Stewart, chief executive of The Money Group, said: “I would hate to say I told you so, but I told you so.
“This is a fascinating move and £200m is not an inconsiderable sum of money with which to disrupt the sector.
“I suspect this will not be the last such move because other larger players will be identifying a similar issue within their models – that of organic growth being too slow and too unpredictable and can often feeling like their recruiters are running around with a leaky bucket.
“Who is this good for? It is great news for firms, regardless of size, that can show they know how to run a business and not a cash cow, and it is also great news for firms that are forward thinking and can see where the future lies.
“It is also potentially good news for the regulator and lenders alike as consolidation can bring visibility and a harmonising of process.”
