LSL has sold its mortgage, protection, and general insurance brokerage firms Embrace Financial Services and First2Protect to broker firm Pivotal Growth for up to £17.8m as it streamlines the business.
The property group, which includes broker network Primis and TMA Club, says Embrace provides mortgage and protection advice to estate agency-introduced customers, including LSL’s franchised and owned estate agency branches.
First2Protect arranges household insurance for customers of LSL’s estate agency division as well as third-party introducers and through brokers that are members of Primis.
Pivotal Growth is a joint venture LSL founded with Pollen Street Capital, in 2021, which aims to “buy and build” a leading national mortgage broker.
LSL says in a London stock exchange statement: “The sale of these businesses to Pivotal Growth continues the steps taken to simplify the group in line with our strategy to focus financial services activity on business-to-business services, through LSL’s Primis network through which it distributes around 10% of all new mortgages in the UK.”
It adds: “We also believe that Pivotal Growth is better placed to increase the value of Embrace and First2Protect.
“The acquisition of Embrace and First2Protect will significantly increase the number of advisers Pivotal Growth employs, expand its distribution into the estate agency market and provide additional capability in the general insurance market.
The group says it “will retain the ability to capitalise on opportunities in direct-to-consumer financial services through its 47.8% equity share in the Pivotal Growth joint venture with Pollen Street Capital.”
Pivotal Growth will pay seven times ebitda earnings for Embrace in 2024 capped at £10m in cash, and will pay £7.8m in cash for First2Protect, which is seven times adjusted 2022 ebitda earnings.
LSL chief executive David Stewart says: “This marks another significant step in our work to simplify the group, while we focus on taking advantage of the exciting opportunities available to us across each of our divisions, including our financial services network business.”
The group says the value of Embrace’s gross assets on 31 December 2021 was £3.8m, which produced a loss of £3.2m.
The value of First2Protect’s gross assets on 31 December 2021 was £2.3m, which produced a profit of £1.2m.
It adds the combined loss for the 2022 financial year for both firms is expected to be £1.3m, adding that “the impact of the disposals will, therefore, not be material to the group”.
