December marked the return to the M&A markets of Lloyds Banking Group which announced the acquisition of consumer credit card business MBNA from FIA Jersey Holdings, a wholly owned subsidiary of Bank of America, for £1.9bn reflecting a 15% premium over gross receivables. The transaction is expected to complete by the end of the first half of 2017, subject to the receipt of competition and regulatory approval. AnaCap Financial Partners announced that it has signed an agreement with Barclays to acquire its French Retail Banking operations including its branch network, life insurance business, wealth and investment management and brokerage operations, subject to regulatory approval. Tungsten Corporation announced the completion of the sale of Tungsten Bank, now renamed Wyelands Bank, to Wyelands Holdings for an aggregate cash consideration of £29.6m.
Arbuthnot Banking Group announced that its wholly owned subsidiary Arbuthnot Latham had made two acquisitions: the purchase of a c. £44.9m private banking loan portfolio, mainly secured against residential property, from Duncan Lawrie for £42.7m; and the acquisition of 100% of Renaissance Asset Finance, a provider of finance for a range of specialist assets including vintage cars and SME business assets, from its founders at a net asset value of £1.6m plus performance based payments over three years totalling no more than £6.5m. In addition within the SME finance market, a new direct fund listed on the London Stock Exchange: RM Secured Direct Lending announced that it had raised aggregate gross proceeds of £50.3m to invest in a portfolio of secured debt instruments to UK SMEs and mid-market corporates. Ranger Direct Lending Fund announced that it had raised c. £16.1m from an open offer and initial placing of shares.
Elsewhere, Arrow Global Group announced its intention to enter the Italian debt market having agreed terms to acquire Zenith Service SpA, a leading servicing business in the Italian structured finance market, for an enterprise value of €17m. Y3S Group acquired a 50% shareholding in Pink Pig Loans, a brokerage offering second charge mortgages and bridging finance solutions to mortgage brokers and IFAs. Online broker Loan.co.uk acquired a controlling stake in brokerage Only Bridging, specialising in second charge, bridging, development and commercial finance.
The lending M&A markets were characterised this month by significant private equity activity. Exponent Private Equity announced that it had reached an agreement to acquire a majority stake in ENRA Group, the specialist provider of mortgage finance, from management and Livingbridge and Mobeus Equity Partners announced that it had completed an initial investment of £9m to back the management buyout of Factor 21, a UK provider of invoice finance facilities for SMEs.
In addition, Equistone Partners Europe and SL Capital Partners announced that they had sold their significant minority stake in the specialist secured lender Together (formerly Jerrold Holdings) for c.£288m in addition to proceeds received during the life of the investment. The sale was to Henry Moser, the founder of the business. Bridgepoint announced that it had sold UK debt purchaser 1st Credit to Intrum Justitia for an enterprise value of £130m.
Elsewhere, Castle Trust Capital entered into an agreement to acquire Omni Capital Retail Finance from CPC Group. Maxxia acquired the specialist point-of-sale car finance broker European Vehicle Contracts, trading as Eurodrive Motor Finance. Tungsten Corporation announced that the sale of Tungsten Bank had received the necessary regulatory approvals and that completion is scheduled for 21 December 2016. The consideration of c. £30m will be realised from the purchaser, Wyelands Holdings, on behalf of Mr Sanjeev Gupta and his family. WL Ross & Co. raised gross proceeds of £171.5m by selling its remaining c.12% stake in Virgin Money Holdings.
The banking market took centre stage within the lending M&A market this month. CYBG PLCconfirmed that it was in discussions with The Royal Bank of Scotland Group plc to which it had made a preliminary non-binding proposal in relation to its Williams & Glyn operations. Tungsten Corporation plc provided an update on the previously announced sale of Tungsten Bank, announcing that the sale was in the final stages of the necessary regulatory approvals and the planned separation of the bank operations from the group was well advanced. OneSavings Bank plc announced that it had completed the purchase of a first charge UK residential predominantly owner occupied mortgage portfolio of c. £60m at a discount to par. UK Financial Investments Limited announced its intention to continue to sell HM Treasury’s c. 9.1% shareholding in Lloyds Banking Group plc over the next twelve months through a pre-arranged trading plan. HM Treasury also confirmed that UK Asset Resolution Limited had launched a sale process of Bradford and Bingley mortgage assets to recover £15.65bn.
In addition, there was further activity led by banks’ strategies to focus on their core activities by disposing of non-core assets. Barclays Bank PLC announced that it had agreed to sell its Retail and Corporate Banking business in Egypt to Attijariwafa Bank S.A., resulting in an expected reduction in risk weighted assets of c. £2bn. Permanent TSB Group Holdings plc announced that it had agreed the sale of £2.29bn of loans held by its UK subsidiary Lansdowne 199 Ltd (comprising the total balance of the residual book of the group's former UK subsidiary CapitalHome Loans Limited) to an affiliate of Cerberus Capital Management, L.P. The gross proceeds for the sale is c. £1.95bn.
Elsewhere, New Day, a leading consumer finance provider specialising in the UK credit card market, announced that funds advised by private equity firms Cinven and CVC Capital Partnershave agreed to acquire it from Värde Partners. Ranger Direct Lending Fund PLC announced that its wholly owned subsidiary, Ranger Direct Lending ZDP PLC, had conditionally placed 23m zero dividend preference shares raising gross proceeds of £23.8m to enable it to take advantage of investment opportunities amongst existing and new potential platforms. SME lender iwoca closed a £21m Series C equity financing round led by Prime Ventures and also raised in parallel a £25m syndicated debt facility. LDF acquired the business and assets of Asset & Corporate Finance Limited, a broker focused on hard asset finance within the construction industry.
SME finance was the most active segment within the lending M&A markets. DueCourse Limited, a cloud-based invoice financing service founded in 2014, raised £1.25m in new equity and £5m in debt funding from backers including GFC (the venture arm of Rocket Internet) and high net worth individuals. DueCourse is also planning to raise a further round of £10-15m in funding over the next ten months to expand globally. Just after the month end, The Paragon Group of Companies PLC announced the acquisition of Premier Asset Finance Limited, a leading asset finance brokerage, for £8.5m in cash and a further £12m payable over the following five years, subject to performance conditions. GLI Finance Limited announced that it had disposed of a number of loan assets to The SME Loan Fund and had acquired from the fund $0.8m of senior preferred stock in the share capital of US asset based lending platform The Credit Junction, the net effect of which was the receipt of c. £1.6m in cash.
Jerrold Holdings, trading under the Together brand, confirmed that minority shareholder Equistone is intending to exit the business with a preferred option identified whereby the Moser family would increase their current majority interest to become the sole shareholder, other than a continued small non-voting shareholding interest held by other members of the senior management team. Ortus Secured Finance, the short-term finance provider to pubs, hotels and nightclubs, announced the closure of a second funding round adding £20m to its new fund.
Elsewhere, The Mortgage Hut Group acquired Mortgage Integrity Limited, a new build mortgage brokerage, which will be rebranded Mortgage Advice Bureau New Homes. City of London Group plc announced that wider strategic options were being examined for its subsidiary Credit Asset Management Limited to help it achieve scale, which may result in the sale of the business.
M&A activity within the lending sector was very light in August in what is traditionally a quiet month, more so this year as lenders continued to evaluate the impact of the Brexit vote.
The high-street banks continued their programmes of non-core disposals. Barclays completed the sale of Barclays Risk Analytics and Index Solutions to Bloomberg for c. £615m. The Royal Bank of Scotland Group announced that it will prioritise exploring alternative means to achieve divestment of Williams & Glyn, having had positive discussions with a number of interested parties concerning an alternative transaction related to substantially all of Williams & Glyn’s proposed business. The Board had concluded it was no longer prudent to continue with the programme of creating a cloned banking platform for Williams & Glyn.
In the digital challenger bank market, following the award of Starling Bank’s banking license with restrictions in the prior month, Mondo Bank announced that it too had received a banking license with restrictions and had rebranded to Monzo. Monzo also announced that it was targeting a further capital raise of up to £20m, including a significant crowdfunding element.
Finally, GLI Finance, the specialist SME lender, announced it had raised gross proceeds of c. £7.1m through a placing to a member of the Somerston Group, which will now hold 21.9% of the company’s issued share capital.
The P2P markets were active this month, raising fresh capital and new funding lines. Lending Works Limited closed a Series A investment round, raising £3m of which £2m was contributed by NVM Private Equity; MarketInvoice Limited announced a £7.2 million investment led by the MCI.TechVentures fund of MCI Capital, a listed Polish private equity group; and GLI Finance Limited announced that its wholly owned subsidiary Sancus BMS Group Limited had acquired a further 10.72% of the issued ordinary share capital of Platform Black Limited taking its holding to 94.65% at a £3.5m valuation. Immediately following this transaction, Sancus BMS entered into an agreement with a consortium of high net worth private investors who will initially acquire 10% of Platform Black's issued ordinary capital for £0.35m in cash, 200,000 Platform Black Preference shares for £0.2m in cash and have the option over the next 5 years to acquire for cash a further 20% of Platform Black's ordinary share capital from Sancus BMS at a £5m valuation. The investors will also provide lending capacity to Platform Black of up to £50m to expand the funder base operating through the platform.
In the banking markets, Tungsten Corporation plc announced that the sale of Tungsten Bankwas expected to close by 31 October 2016 to release cash of c. £30m. MasterCard Incorporated announced that it has entered into a definitive agreement to acquire 92.4% of VocaLink Holdings Limited for c. £700 million with the potential for an earn-out of up to an additional £169m if performance targets are met. VocaLink’s shareholders comprise some of the largest UK banking groups - The Royal Bank of Scotland Group plc announced that it expected to report a pre-tax gain of c. £150m on the completion of the sale of its 21.4% shareholding.
Elsewhere, Freedom Finance, a portfolio company of Pollen Street Capital, announced its agreement to acquire Sensible Home Finance, the UK mortgage and loan broker, rebranding it to “Freedom Mortgages”, whilst also announcing the launch of a new bridging and commercial arm. Mortgage Advice Bureau (Holdings) plc announced the completion of the sale of its 49% stake inCapital Private Finance Limited for £2.7m in cash.
In what was a very quiet close to the half-year within the lending M&A markets, HSBC confirmed that the transaction to sell its entire business in Brazil, comprising HSBC Bank Brasil S.A -Banco Multiplo and HSBC Servicos e Participacoes Ltda to Banco Bradesco S.A for an all cash consideration of US$5.2bn had been approved by Brazil's Competition Agency and that the transaction completed on 1 July 2016. Arbuthnot Banking Group PLC announced that following shareholder approval, it had completed the sale of 6.0m ordinary shares in Secure Trust Bank PLC, representing 33.0% of its existing issued share capital.
The Mortgage Lender Limited, which secured FCA authorisation in May 2016, announced that it had secured investment from TwentyFour Asset Management and expected to originate £250m of loan volumes in its first year of trading. In the mortgage broking markets, it was widely reported that London & Country Mortgages Limited was reviewing its strategic options.
Elsewhere, GLI Finance Limited announced that it had agreed to acquire the entire issued share capital (that it did not already own) of Funding Knight Limited for £0.75m from administrators and that it had committed to provide at least a further £1m of capital to finance its ongoing operations. Ranger Direct Lending Fund PLC announced that it intended to raise up to £30m through a placing of zero dividend preference shares in order to diversify its capital.
In a relatively quiet month, Pollen Street Capital announced a significant investment in 1st Stop Group Limited, the specialist consumer lender, that will allow the group to continue to develop and grow its lending book whilst also investing in its infrastructure and platform. Separately, Tech Mahindra Limited(part of the Mahindra Group) announced that it had entered into an agreement to acquire Target Group, a leading BPO and software solutions provider to the lending, investment and insurance sectors, for £112m from funds advised by Pollen Street Capital.
Equity capital markets activity remained strong. Barclays plc announced that it had placed c.103.6m ordinary shares in the capital of Barclays Africa, raising aggregate gross sale proceeds of c. £603m. Following completion, Barclays will hold c. 50.1% of Barclays Africa's issued share capital. Arbuthnot Banking Group PLC announced a conditional placing of ordinary shares in Secure Trust Bank PLC: 6.0m shares, representing 33.0% of the company’s issued share capital, were sold at a price of £25 each. Arbuthnot’s shareholding will reduce accordingly from 51.9% to 18.9%. Shawbrook Group plc announced that the Special Opportunities Fund (Guernsey) LLP, advised by its investment advisor Pollen Street Capital, had sold 13.8m shares in the company, equivalent to c. 5.5% of theissued share capital, retaining c. 38.9% post-sale.
Elsewhere, Chiltern Capital completed a significant minority investment in Vantage Finance, the master broker of property lending solutions; and following a strategic review led by the new CEO, GLI Finance Limited announced a proposed restructuring of the group to create one unified lending business under the ‘Sancus BMS’ brand, including the company’s 84% shareholding in Platform Black.
Within the lending M&A markets, SME finance continued to be active. In the invoice financing space, Spring Ventures backed a group of experienced commercial lending professionals led by new CEO John Onslow to acquire IGF Invoice Finance Limited from Greater London Enterprise. Spring Ventures initially invested £9m to fund the acquisition and provide growth capital, and will commit a further £11m of follow-on capital over the next three years and will take a majority stake. Elsewhere, Platform Black, an online business finance marketplace for UK SMEs, announced that it had raised £5m in preference equity from its parent GLI Finance to position the business for further growth.
Equity capital markets activity remained strong. Morses Club, a leading UK non-standard consumer finance company, announced that following the successful pricing of its £68.5m placing, it had applied for admission to AIM with a market capitalisation of c. £140m based on the placing price. Perpignon Limited, the selling shareholder that is backed by Rcapital, will hold c. 51% of the issued share capital following admission. Mortgage Advice Bureau (Holdings) announced that certain individual shareholders (including board directors) sold c. 15% of the company’s issued share capital via an accelerated bookbuild to institutional shareholders, raising gross proceeds of c. £27.2m.
In the banking markets, Barclays announced that it continues to consider various options, both strategic and capital markets led, to implement the proposed sell down of its c. 62% shareholding in Barclays Africa Group Limited, and sought shareholder approval to implement capital markets transactions which would result in the accounting de-consolidation of BAGL. Elsewhere, The Royal Bank of Scotland Group plc announced that there was a significant risk that the separation and divestment of Williams & Glyn would not be achieved by 31st December 2017.
Banking continued to be the most active segment within the lending markets. Metro Bank PLC completed its IPO on the main market of the LSE, having conditionally raised gross proceeds of £400m through a private placement which implied a market capitalisation of c. £1.6bn. OneSavings Bank plc announced the completion of a purchase of a £112m UK first charge residential mortgage portfolio at a discount to par. Focus FS Ltd, trading as Mondo Bank, the new digital challenger which awaits its banking licence, completed a £6m funding round that was led by Passion Capital but included £1m raised through the crowd funding platform Crowdcube.
In the SME finance markets, 1pm plc announced the acquisition of 'hard' asset finance provider Bradgate Business Finance Limited for an aggregate consideration of up to £2.75m, comprising £2.20m payable in cash on completion and up to a further £0.55m in shares over the next three years subject to certain performance targets being achieved. The executive management team at Positive Cashflow Finance announced that they had taken full ownership of the business having acquired the remaining 20% stake held by private equity backer Infinity. EZBob Ltd, trading as Everline and EZBob, announced it had closed a Series C investment round with a £20m equity investment from Leumi Partners and funds managed by existing investor Oaktree Capital Management.
Private equity remained active with Beech Tree Private Equity announcing an investment into secured loans broker The Fluent Money Group in order to further accelerate growth through complementary product areas and selective acquisitions. Student lender Future Finance Loan Corporation Limited raised growth capital of £119m from the Blackstone Strategic Opportunity Fund and other investors, including QED Investors, Colchis Capital, Invus Opportunities, KCK, DW Partners, Fenway Summer Ventures, Ridge Road Partners and 1/0 Capital.
Elsewhere, Mortgage Advice Bureau (Holdings) plc announced that its joint venture partner Countrywide plc had exercised its option to acquire MAB’s 49% interest in Capital Private Finance Limited, which provides mortgage and protection advice, for £2.7m. Arrow Global Group PLC announced that it had agreed terms for the acquisition of InVesting B.V., a leading consumer debt purchaser and collections provider with operations in the Netherlands and Belgium, for a total consideration of c. £78.5m
In a quiet month for M&A within the lending sector, it was the banking markets which were most active. National Australia Bank announced the completion of its demerger of CYBG, the holding company for Clydesdale and Yorkshire banks, and the IPO of the group, achieving a dual listing in London and Australia, with the offer price implying a market capitalisation of c. £1.6bn. In addition, Metro Bank was reported to be finalising its own listing on the LSE with completion targeted for March.
OneSavings Bank announced the acquisition of c. £396m of UK residential mortgage loans from a subsidiary of Deutsche Bank AG, completion of which is conditional upon the establishment of an off-balance sheet securitisation vehicle. OneSavings Bank also announced the acquisition of a £14m portfolio of UK 2nd charge mortgages from Melbourne Mortgages. Close Brothers Asset Finance, a subsidiary of Close Brothers Group, announced it had bought Finance for Industry, a leading specialist finance broker for the engineering, plastics and machinery sectors.
LSL Property Services acquired a 65% interest in Group First, which brokers mortgage and protection services, for £9.1m in cash with put and call option provisions to increase LSL's investment up to 100%. Zoopla Property Group announced that it had invested in and agreed long term strategic partnerships with Landbay, a leading peer-to-peer lender for property, and Trussle, an online mortgage adviser.
Elsewhere, GLI Finance Limited, the SME finance provider via platforms in which it has an equity stake, announced an update on its strategic review, increasing its ordinary shareholding in Platform Black from 43.9% to 83.7% and concluding that it will remain a passive investor in FundingKnight whilst reducing its overall financial exposure and seeking a long term exit.
Private equity remained active within the lending sector with a number of transactions focused on the real estate sector. Turbo Group Holdings, an entity owned by Patron Capital Partners and Electra Private Equity, acquired the equity release division of Grainger for a gross consideration of c. £325m. Pine Brook Partners announced it had led an equity financing arrangement for Belmont Green Finance Limited, a newly-formed company to focus on lending in the underserved segments of the UK residential mortgage market. Maslow Capital, a leading provider of development finance in the UK, and TPG Special Situations Partners announced the establishment of a joint venture to focus on direct lending in the UK real estate sector.
Within the banking markets, Starling Bank, the new digital bank, announced it had secured $70m of investment from a US investor as it awaits authorisation to launch a new current account proposition. George Osborne announced that the sale of the UK government’s remaining shareholding in Lloyds Banking Group would be delayed due to the turbulence in financial markets. Unity Trust Bankannounced the transfer of its clearing services to NatWest, having previously announced the buy-back of the majority of the Co-operative Bank’s shareholding and the successful raising of £8m of new capital to support its growth.
Elsewhere, Asset Alliance Group has acquired specialist bus and coach finance intermediary Forest Asset Finance Limited; Neyber, which offers loans to employees repayable through payroll, raised £6m in the first close of Series Afunding; Sanclare (UK) Limited acquired Sigma Financial Group, the credit management and business outsourcing services provider; and John Charcol announced the acquisition of Simply Finance Group.