Hargreaves Lansdown takeover agreed - around 5.4Bn

Hoenir

lr1277 said:

I was under the impression the private equity playbook was to get the target company to take on as much debt as possible and that money was paid to the new PE owners.

Private equity takes various forms. There's plenty of highly successfull private companies that have never had a stock market listing. 

jimjames

Hoenir said:

lr1277 said:

I was under the impression the private equity playbook was to get the target company to take on as much debt as possible and that money was paid to the new PE owners.

Private equity takes various forms. There's plenty of highly successfull private companies that have never had a stock market listing. 

The ones that do have a listing have been fairly successful too although discounts are still very high.

Hoenir

jimjames said:

Hoenir said:

lr1277 said:

I was under the impression the private equity playbook was to get the target company to take on as much debt as possible and that money was paid to the new PE owners.

Private equity takes various forms. There's plenty of highly successfull private companies that have never had a stock market listing. 

The ones that do have a listing have been fairly successful too although discounts are still very high.

From an inside view over the years from a both sides perspective . I've always found it debatable how much takeovers actually add value. 

cloud_dog

Hoenir said:

lr1277 said:

I was under the impression the private equity playbook was to get the target company to take on as much debt as possible and that money was paid to the new PE owners.

Private equity takes various forms. There's plenty of highly successfull private companies that have never had a stock market listing. 

Yes I'm sure PE firms are very profitable.

I've mentioned this on the other HL thread when the takeover was mentioned but, having worked for an organisation taken over by CVC Partners, my experience is that they will always get their pound of flesh, their 20% return each year irrespective of the impact, and this usually takes the form of cutting costs to ensure the ROI.

Rollinghome

PE usually targets companies that are strapped for cash or they see inefficiencies and poor management. The first doesn’t apply, but there’s certainly room for better management.
In the 17 years I’ve been a customer, the website has remained unchanged. Once it was a revelation compared with the limited and amateurish competition, but, aside from the app, nothing has improved, but a lot has got worse. It feels locked in time, like one of those old grand hotels with brown wallpaper and paint falling off the windows. It still has some good features, but not enough to justify the price. To make things worse, the Woodford fiasco showed shocking incompetence that continues to damage the firm’s reputation.
Their biggest problem has been that the investing world changed and too much was paid out in dividends leaving too little for investment. Back in the day, Peter Hargreaves looked at the outrageous trail-commission on funds being paid to IFAs and saw an opportunity.  That all went with RDR.
It’s crazy to think it can carry on regardless charging £11.95 a trade when the competition is charging less than half or even zero and around half for platform fees. Many of their customers that were once paying a fortune in platform fees for funds have found they can buy ETFs and pay HL just £40 a year, but why bother when they can now get a full range of investments from the competition for little or no more.
Most of my pf went to Iweb years ago and HL have been attracting new clients at a slower rate than the competition for years.  If nothing else, it’ll be interesting to watch

MDMD

lr1277 said:

I was under the impression the private equity playbook was to get the target company to take on as much debt as possible and that money was paid to the new PE owners. I imagine in a way that incurred a minimum of tax for both the company and its new owners.

Then the target company has to raise its prices to pay off the debt. So as a customer you get higher prices but not necessarily better service.

I thought this was the model for the PE takeover of the AA.

Or I might be behind the times on how PE now works.

The interest is to a certain extent non deductible against tax now as it is now subject to a restriction on the expense 

https://www.gov.uk/guidance/corporate-interest-restriction-on-deductions-for-groups

What PE firms like is strong, reliable cash flows (to pay the debt and interest). HL have this given their market position. 

Obviously they would look to increase these cashflows by raising prices and cutting costs but not at the expense of losing customers.

orange-juice

I transferred some investments to HL for some cashback, and according to the offer T&Cs need to remain a customer for a minimum of 12 months which is around May '25.

If this goes ahead, I wonder if I'd be free to transfer out early?

masonic

orange-juice said:

I transferred some investments to HL for some cashback, and according to the offer T&Cs need to remain a customer for a minimum of 12 months which is around May '25.

If this goes ahead, I wonder if I'd be free to transfer out early?

Why wouldn't the new owner exercise its contractual right to make that deduction if you left early? I'm expecting, and budgeting, to stay for the full 12 months. The net result being I keep over 90% of the cashback paid after netting off fees.

wmb194

orange-juice said:

I transferred some investments to HL for some cashback, and according to the offer T&Cs need to remain a customer for a minimum of 12 months which is around May '25.

If this goes ahead, I wonder if I'd be free to transfer out early?

Unless there's a change of ownership clause in the T&Cs*, no.

*Doubtful.

granta

masonic said:

orange-juice said:

I transferred some investments to HL for some cashback, and according to the offer T&Cs need to remain a customer for a minimum of 12 months which is around May '25.

If this goes ahead, I wonder if I'd be free to transfer out early?

Why wouldn't the new owner exercise its contractual right to make that deduction if you left early? I'm expecting, and budgeting, to stay for the full 12 months. The net result being I keep over 90% of the cashback paid after netting off fees.

I guess if they made a significant change to the fees or charging structure (like removing the capped charge for etfs), they might offer a no-penalty transfer out? 
&me offered me a the chance to leave early without penalty when they announced their sale to Moneyfarm.