Why I won’t be selling my LV stake to a private equity firm

We LV members need to be given a fair – market value – return for our stake in the business because we actually own it and the offer isn’t good enough

The £530 million sale of LV= to US firm Bain Capital was the ‘best financial outcome’ for members, it chief executive said (PA Archive)

The other day I received a letter from Matt Popoli, “Global Head of Insurance Solutions, Bain Capital”. Never met the man or indeed anyone from Bain Capital. A big American private equity firm, it is. Nice of him to write, and of course he was looking for my vote as a member of the Liverpool Victoria Friendly Society, a mutual – LV, or “LV=”, as it’s absurdly rebranded itself for marketing purposes. It came as part of a big pack sent from LV about Bain’s offer for our society. It seems to me that there’s an awful lot of propaganda in there.

It’s quite a thing, a small saver like me getting such a missive from an ambassador of global capitalism, but it has arrived simply because LV is that old-fashioned and disappearing thing – a mutual society – and my vote is worth the same as anyone else’s, including those of the board and the senior managers.

Well, I’ve read the paperwork, and I’ll be voting against the Bain offer. I’m no mug.

First, you have to be suspicious about private equity, generally, because it’s private equity and as a sector it has a reputation for asset stripping and generally diddling naive owners of venerable businesses. Bain is offering me £100 to hand over my stake in the business, and it just doesn’t feel right. If private equity is offering you £100 for something, you can be damn sure it’s worth considerably more, and especially after they’ve finished with it. I’m not entirely clear what their intentions are towards the “with profits” savings funds, for example, let alone jobs and communities that rely on LV, but if I was in their shoes, with a purely private equity business head on, I’d shut the thing down after a minimal delay, and sell the customer base and assets to a third party.

That, I’m sorry to say, has been the fate of so many other demutualisations in the financial sector which has the seen the disappearance great old names and what were fine businesses, particularly the 19th century building societies with strong, proud local roots (and once a powerful force for wider home ownership among the working classes). The old names are worth recalling in the context of the LV bid: Bradford & Bingley, Alliance & Leicester, Bristol & West, Cheltenham & Gloucester, Dunfermline, Stroud & Swindon, the Woolwich, the Leeds, not to mention the Norwich Union. In their day, by the way, with large local head offices and spreading property ownership, they were all part of what we now call regional “levelling up”. All gone.

I also want to know why we members haven’t been told about the other bids on the table. I can’t help wondering whether there is something in it for the board or senior managers. In the mailing from LV with the voting papers, there are some weasel words. “The Chair, executives, and non-executives will receive no bonuses directly related to the transaction with Bain Capital or any similar transaction in the future.” Note that “directly related”, which leaves open an indirect one.

The LV bosses also offer up the lukewarm verdict of “The Independent Expert”, Oliver Gillespie, of Millman LP, that the proposals are “fair and reasonable” to members. That’s not the same at all as the best possible deal and the biggest payout. I’m not convinced that £100 is the best we can get, even if we wanted to sell out.

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I’m not in love with LV, or the mutual concept, and I don’t actually think global capitalism is necessarily evil. Foreign investment in the City and the British car industry has been nothing but beneficial, for example. Over the years I’ve been unimpressed by the performance of my LV nest egg, and their fund management has had to be outsourced. The charges are absurdly high – so that, according to LV itself, the growth potential of my with-profits ISA is 3.5 per cent, but “the current yearly total charge of 1.75 per cent would then reduce the potential yearly growth to 1.69 per cent”.

Even so, we LV members need to be given a fair – market value – return for our stake in the business because we, the members, actually own it and the Bain offer isn’t good enough. At the moment, Mr Popoli, the answer is “thanks, but no thanks”.