Among its current investments in the financial services space is Domestic & General, this is a company that provides insurance cover for broken domestic appliances, in both the UK and Europe.
One of the other shareholders in this business is Adia, a sovereign wealth fund administered by the government of Abu Dhabi, and this is the third bidder in the Hargreaves Lansdown business.
As for Adia, FT Adviser understands it regards itself as a financial investor, rather than a strategic investor in the consortium.
FT Adviser understands this means it will not take a role in the day-to-day management of the company.
Shareholders in Hargreaves Lansdown have been offered the chance to stay invested, by effectively swapping their current stake in the ompany for new unlisted shares in the company.
The company’s co-founder and largest shareholder, Peter Hargreaves, has a 20 per cent stake, and has confirmed that he is selling 10 per cent for cash, while the other 10 per cent he will retain by investing in the private equity fund.
Hargreaves had previously been very critical of how the business is run, commenting that, in his view, half the employees could be made redundant without the business suffering.
In terms of the prospects for the company going forward, Ben Williams, director of research at Hannam and Partners, says he regards the price paid for the company by the new consortium as rather high, given where the growth rate of the business has been.
But he says the experience of the consortium, particularly Nordic Capital, means “I wouldn’t underestimate them. The issue for Hargreaves Lansdown, which the bidders referenced in their official document, is that it has under-invested in automation and technology more broadly, and it has kept the price point too high.
"The reality is that a client with, say, a £30,000 portfolio doesn’t need to be with Hargreaves Lansdown. The Bidco assesses that client attrition has been driven by 'friction and gaps in the digital experience and certain aspects of the client value proposition, which have remained largely unchanged since 2017'.
"Part of the solution is investment 'required in both the digital experience and the overall client value proposition, including revenue investment, to address this declining retention'.”
Williams says he believes the reference to 'revenue investment' from Hargreaves Lansdown to mean fee cuts.
He says Hargreaves Lansdown pricing is considerably higher than that of rivals, “but when it was a company quoted on the stock market, no chief executive could cut the charges dramatically as it would mean a year of much lower turnover, whereas the aim of a private equity owner is to sell it for more in five years than they paid today, so they have more scope to do something on price, perhaps by cutting the charges for clients with smaller pots of assets”.
