Primis, the national mortgage network parented by LSL, will be selling two of its broker firms to its parent company’s new PE-backed venture.
Pivotal Growth was launched as a £200m buy-and-build project by LSL and Pollen Street Capital back in 2021. Now, Pivotal Growth will acquire RSC, in Cheshire, and Group First, in Colchester, both of which are currently owned by LSL’s other subsidiary, Primis.
The consideration payable is 7x the combined Group First and RSC EBITDA in calendar year 2024, subject to agreed working capital adjustments, capped at a maximum of £20m. The consideration is payable in cash to LSL during H1 2025, at which time LSL will consider the most effective use of the funds.
Going forward, LSL will continue to account for its 47.8% equity share of Pivotal Growth profits after tax, which will include the profits generated by Group First and RSC. LSL will also benefit from the incremental profits of Group First and RSC in any future Pivotal Growth exit event.
These disposals are in line with LSL’s strategy to simplify the Group, and to focus on developing further its leading Financial Services Network business. LSL claims that Pivotal Growth is better placed to increase the value of Group First and RSC, and these acquisitions mark a significant step in building critical mass in the new build brokerage sector, that has been targeted by Pivotal, as it becomes a leading player in this space.
For the 2021 financial year, the value of Group First’s gross assets was £15.2m and profit for the year was £1.4m. The value of RSC’s gross assets at 31 December 2021 was £3.7m and profit for the year was £0.7m. Combined profit for the 2022 financial year is expected to be £0.7m, and the impact of the disposals will, therefore, not be material to the Group.
David Stewart, Chief Executive, commented:
“The transfer of Group First and RSC represents an important step in the execution of our strategy and in the development of Pivotal Growth. Financial Services is at the heart of the Group’s growth strategy where we have identified significant opportunities to develop LSL’s position as the leading provider of services to independent mortgage brokers.
“These transactions help to simplify the Group structure to allow us to focus on maximising these business-to-business opportunities, whilst also reducing exposure to housing market cycles. Pivotal Growth was established in 2021 to exploit the opportunities we had identified in the direct-to-consumer mortgage broking market, and growth in the new build sector is a strategic focus for Pivotal Growth.”
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Louise Jeffreys is managing director of Gunner & Co, an IFA broker with values based on strong relationships built on trust, credibility and value.
Gunner & Co. specialise in IFA sales, IFA business sales, retiring IFAs and IFA client bank sales.