The LV= vote on the Bain takeover: what's at stake | Mergers and acquisitions | The Guardian

The fate of one of the UK’s oldest and largest mutual insurers will be decided on Friday as LV= members cast their ballots on a controversial takeover by US private equity firm Bain Capital.

The deal has played into a larger debate about the takeover of British companies by private equity and raised concerns among campaigners about the dwindling number of member-owned businesses in the UK.

We take a look at the controversy surrounding the sale of the 178-year-old insurer formerly known as Liverpool Victoria, which was founded to cover burial costs for Liverpool’s poor.

Why is LV=’s leadership recommending the Bain deal?

LV=’s leadership insists that the £530m deal is in its members’ best interests and will secure much-need capital meant to help invest in technology and avoid being squeezed out by larger insurers.

The firm said it was struggling to raise money due to restrictions on fundraising imposed on mutuals, linked to a cap on their debts.

Why is the Bain takeover controversial?

Members, campaigners and politicians are concerned that transferring power to an American private equity firm will put an emphasis on short-term profits, at the expense of customer service and returns for members.

They are also concerned that private equity firms like Bain often insist on job losses or cost-cutting to achieve higher returns.

The Association of Financial Mutuals has also alleged that there is a conflict of interest for the chief executive and chair of LV=, who have a duty to look after members’ interests but have an interest in continuing to work for the business after the Bain takeover.

However, Bain has not published any details of its plans for executive pay, and LV= has said there are no contract discussions between leaders and the private equity house.

What does it mean for the future of mutuals?

If members vote in favour of the deal, it will mean losing one of the oldest and largest member-owned businesses in Britain. Few mutual giants remain in the UK, aside from supermarkets-to-funeral service Co-op Group and Nationwide Building Society.

What were the other options?

LV= said it had considered 12 offers in total after it put itself up for sale in summer 2020, including from Bain and from rival mutual Royal London.

Royal London offered a higher bid of £540m, but LV= said the deal would not cover liabilities linked to the with-profits fund, and included “less certain” administration and investment costs. LV=’s board said it concluded that Bain’s bid offered greater value to members and would result in “greater and more certain pay-outs to members, on a more accelerated basis”.

However, politicians and campaigners have claimed that the Royal London deal would have helped maintain LV=’s mutual status and allow it to remain British-owned.

The Financial Conduct Authority said in October that it did not intend to block the takeover or plans to demutualise the firm, and refused to change its mind even when approached by lawyers working on behalf of two members on Thursday as part of an 11th-hour bid to put the brakes on the deal.

What does the Bain deal mean for members?

Bain Capital has insisted that LV= customers would “receive significant financial benefits” from the takeover and said last month that it was “committed to the long-term growth and success” of the business. However, the immediate financial benefits have been criticised.

LV=’s 1.1 million members have been offered £100 each if they vote in favour of the deal, which some members have branded an “insult” and a meagre return for the loss of mutual status and the prospect of ownership by a private equity firm.

Meanwhile, a further 271,000 “with-profits” members, who legally own LV=, will also share a further £101m between themselves.

What will happen on Friday when members get to vote?

LV=’s 1.1 million members will be asked to cast two ballots related to the takeover on Friday afternoon, following a special general meeting at 2pm that is closed to the public and reporters.

The first vote will cover whether to approve the deal and will only require approval from 75% of members who show up to vote, with no quorum – meaning there is not a minimum threshold of members who are required to cast their ballot to ensure it is valid.

The second – which will only take place if the first vote passes – will ask members to agree to scrap a rule requiring at least 50% of all its 1.1 million members to take part in any vote that could result in demutualising the business, and take power out of the hands of its members.

• Mergers and acquisitions

• Private equity
• Insurance industry
• Financial sector
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