Hargreaves Shares Bounce as Private Equity Firms Thrash Out Deal

Over
the
last
five
days,
Hargreaves’
share
price
is
up
5.55%
to
£11.57,
a
sign
investors
are
responding
positively
to
the
private
equity
interest.

The
latest
bid
is
the
fourth
such
offer
submitted
to
the
investment
firm.
It
had
previously
rejected
three
approaches
on
valuation
grounds.

The
companies
now
have until
1700
on
July
19
to
close
their
deal.

What
Will
Happen
to
Hargreaves
if
it
is
Sold?

If
Hargreaves
Lansdown
is
sold
to
a
private
equity
business,
or
businesses,
it
will
become
the
latest
FTSE
100
firm
to
de-list
from
the
index
in
favour
of
private
ownership.

As
a
result,
its
shares
will
no
longer
be
available
to
the
public
for
purchase
and
trading.

If
that
occurs,
the
story
would
not
just
illustrate
private
equity
interest
in
UK
PLC,
but
also
underline
the
malaise
gripping
the
UK’s
capital
markets,
which
have
struggled
to
display
the
compelling
valuations
on
offer
in
the
US
and
certain
emerging
markets.

Fund
managers,
investors,
and
businesses
alike
have
complained
about
UK
company
valuations.
This
has
led
some
firms
to
relist
in
more
favourable
markets,
or
simply
to
ignore
the
UK
as
a
flotation
location
altogether.

In
September
last
year,
Cambridge-based
chip
designer

Arm
Holdings
rejected
London
as
a
listing
opportunity
in
favour
of
a
place
on
the
the
Nasdaq.
It
shares
have
since
prospered.

Betting
firm
Flutter
also
ditched
its
primary
London
listing
in
favour
of
New
York,
while
the
cyber
security
giant
Darktrace,
which
floated
in
London
2021,

accepted
a
US
private
equity
bid
in
April
this
year.

Christian
Kent,
managing
director
of
Houlihan
Lokey,
says
the
Hargreaves
deal
underscores
the
so-called
“valuation
disconnect”
for
wealth
managers
working
with
both
public
and
private
markets.

“With
over
25
private
equity-backed
wealth
management
firms
in
the
UK,
this
move
isn’t
surprising,”
he
told
Morningstar.

“Over
time,
we
expect
to
see
further
consolidation
among
these
firms.
With
robust
private
equity
backing,
HL
could
emerge
as
a
pivotal
player
in
this
consolidation
through
M&A
activities.”

Kent
now
expects
that,
under
private
equity
ownership,
Hargreaves
will
experience
strategic
changes
that
will
be
designed
to
address
its
own
historical
challenges.

“One
area
of
potential
development
is
the
integration
of
advisory
services
into
Hagreaves’
business
model,
aligning
it
more
closely
with
other
private
equity-backed
strategies
in
the
sector,”
he
says.

Is
Hargreaves
Lansdown
a
Healthy
Business?

Founded
by
Peter
Hargreaves
and
Stephen
Lansdown
in
1981,
Hargreaves
Lansdown
has
grown
into
one
of
the
most
successful
financial
services
firms
in
the
UK.

In
particular,
its
proposition
of
selling
units
of
investment
funds
on
its
platform
to
retail
investors
helped
it
provide
a
cheaper
alternative
to
expensive
initial
investment
charges
fund
managers
typically
imposed
on
their
clients.
It
also
streamlined
the
application
process,
easing
the
administrative
burden
on
private
investors.

As
of
March
2024,
the
business
has
over
£150
billion
of
assets
under
management,
and
serves
around
1.86
million
clients.
For
the
financial
year
ending
30
June
2023,
it
made £402
million
in
profits.

However,
price
pressures
in
the
wider
wealth
management
world
mean
the
firm
is
now
struggling
to
match
offerings
from
competitor
retail
investing
platforms
like
AJ
Bell,
Vanguard,
and
eToro.
It
has
also has
also
struggled
to
attract
younger
customers.

In
addition,
the
business’s
reputation
has
also
been

affected
by
the
Neil
Woodford
scandal
in
the
UK.
In
2019,
Neil
Woodford’s
£3.7
billion
LF
Woodford
Equity
Income
fund
was
frozen
after
investors
frantically
tried
and
failed
to
withdraw
their
money
from
the
fund.
Woodford
has
since
been
hit
with
an
FCA
warning
notice
over
his
conduct.

Hargreaves
had
held
the
fund
on
its
“Wealth
50”
“best-buy”
list
and
was
highlighting
its
apparent
credentials
to
its
own
customers
right
up
until
the
suspension.
The
incident
put
the
company
in
the
spotlight
and
raised
serious
questions
about
the
way
funds
are
marketed
to
customers
without
financial
advisers.

Since
2019,
Hagreaves’
share
price
has
been
on
a
downward
tear.
At
its
all-time
high
in
that
year,
its
stock
was
worth
over £22
per
share.

Which
Fund
Managers
Back
Hargreaves
Lansdown?

Certain
fund
managers
do
still
back
the
business,
however,
and
one
is
Nick
Train,
the
manager
of
the
Morningstar
Bronze-Rated
Finsbury
Growth
&
Income
Trust
(FGT).

Train,
who
has
recently
repeatedly
apologised
for
what
he
called
“mortifying”
underperformance,
remains
bullish
on
Hargreaves,
which
he
says
still
has
growth
potential.
Though
the
trust’s
performance
has
been
decidedly
below
par,
Hargreaves
is

not
one
of
the
companies
badly
affecting
its
track
record. 

WS
Lindsell
Train
UK
Equity
Fund
(4.46%),
Lindsell
Train
Global
Equity
Fund
(4.20%),
and
Finsbury
Growth
&
Income
(3.08%).
According
to
Morningstar
Direct
data,
Train’s
three
strategies
–

WS
Lindsell
Train
UK
Equity,

Lindsell
Train
Global
Equity,
and
FGT
itself –
have
a
combined
exposure
of
12%
to
Hargreaves’
shares.

“[Hargreaves
Lansdown]
will
[have]
to
take
advantage
of
the
data
[it]
generates,
by
dint
of
having
more
customers
and
more
customer
interactions
than
any
of
its
peers,”
Train
said
in
a
recent
update
to
FGT
investors.

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