Mike Colato

#Hargreaves_Lansdown Hargreaves Lansdown backed the £5.4 billion bid for the FTSE 100 fund manager today from a private equity consortium, a deal that will end its time as a listed company. The Bristol-based finance firm has been listed in London since 2007. It said today that the final offer valued its shares at 1140p in cash and would include a 30p per share dividend for the financial year which ended on 30 June. Compared to the Hargreaves Lansdown share price before the approach was first made in April, the price is at a premium of over 54%. The consortium is made up of CVC, Nordic Capital and ADIA. Hargreaves Lansdown is named after its founders – Peter Hargreaves and Stephen Lansdown – who set it up as an investment tip sheet. It now runs a state-of-the-art trading platform from which clients can run their own portfolios and pensions. https://lnkd.in/dKpizupy

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Thinking of securing investment, an exit or MBO involving private equity? Tom Whittard, partner at Westbridge, gave three tips in an article in Corporate Financier magazine. We discuss them in this blog - https://lnkd.in/eWKEQ5dZ How we can help: We offer comprehensive support for management teams, going beyond just the deal to help them plan, complete the transaction with a good investor and provide ongoing advisory support to deliver growth plans. Get in touch with us. #investors #privateequity #corporatefinance

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Join Richard Dillea as he shares valuable insights on ‘Restructuring tax – the expense, the claim, and the value add’ at the ICAEW R&I conference tomorrow. Don't miss this opportunity to learn about UK corporation tax considerations during asset sales in insolvency and discover practical solutions to tackle these challenges. Learn more here: https://okt.to/K308FL #Tax #EMEATax #Restructuring #Insolvency

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Interesting thoughts from Houlihan on Direct PE (and the maturation of the market around independent sponsors) - "global volume (will) rise from $6 billion in 2019 to an estimated $50 billion this year, with annual deal numbers tripling over that period. We’ll see over 780 transactions this year... Directs have the promise to account for half of all annual capital raised for private equity in 10–15 years." #privateequity #independentsponsors

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New Deal Alert! Congratulations to all parties involved! Despite the challenging macroeconomic environment, this deal highlights Equiteq's expertise in the knowledge economy, particularly in the recovery management space. If you’re interested in learning more, we’d be delighted to provide insights on this deal or others. Feel free to get in touch! Stay tuned—more successes are on the horizon, with several recently closed deals yet to be announced! #DealSuccess #Equiteq #KnowledgeEconomy #RecoveryManagement #MergersAndAcquisitions #Expertise #PrivateEquity

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There has been lots written about the impact of the budget, and some names are dominating the headlines. At the smaller end of the market where YFM Equity Partners invests we can already see Entrepreneurs and Business Leaders adapting to the new normal, and most positively where there will be opportunities to grow faster. One of the things we did not expect to see so quickly is a surge in Entrepreneurs looking to do some sort of ownership change transaction, The Business Magazine - South West & West Midlands / The Business Magazine - South East covers the 300% increase in enquiries below. These enquiries are Management Teams looking to buy the businesses they run from their owners, or owners looking to de-risk themselves with some cash out now and support from a Private Equity investor.

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This should be required reading for investors. Kudos to Caroline Escott and Chris Hodge. Audit underpins market integrity, yet there is strong evidence that it is failing. The US regulator’s latest inspections bring this to life (https://lnkd.in/eVxwrhkZ): 34% of reviewed audits by six global firms lacked evidence to support their opinions. High rates of audit deficiencies are repeated globally (International Forum of Independent Audit Regulators (IFIAR). Two points I’d highlight on the back of this report: 1. Investors should use their votes Of the steps that Railpen points to, one that investors can immediately action is their vote. Despite audit failings, investors keep reappointing auditors and audit committees. Auditors in the UK received an average 99% support in 2023. In the US, the figure was 98%. Investor indifference permits poor audit quality. Please see my article on the need for robust voting: https://lnkd.in/epsep6WK 2. Poor audit quality is a risk to capital protection One insidious consequence of audit weakness is not getting the attention it should. Auditors appear to be failing to check company compliance with capital maintenance rules, opening the door to over-distribution, weaker capital buffers and heightened risk of failure. Auditors generally have a role in policing capital maintenance rules (not the same as accounting standards – https://lnkd.in/eWzBy3_7). Critically, companies generally mustn’t distribute (i.e. pay dividends / share buybacks) out of unrealised (e.g. mark-to-market) gains. It is not clear, however, that this is being enforced. This was a key conclusion of the UK’s BEIS Select Committee 2019 inquiry into audit (https://lnkd.in/e8vqGGBd), chaired by Rt Hon Rachel Reeves, now Chancellor. The Committee called for urgent action to enforce capital maintenance rules. Recent research by Andy Haldane (https://lnkd.in/ecqct3Tj) and Adam Leaver (https://lnkd.in/ev43tNP6) underlines ongoing problems of overdistribution. As the UK advances its Audit and Corporate Governance Reform Bill, it should return to the Select Committee’s original proposals. Companies should publish in full their distributable reserves and a breakdown of their unrealised and realised profits, taking away the veil which can enable over-distribution. Auditors should be held accountable for ensuring this is done. Of the options on the table to boost growth, this has the advantage of being fiscally neutral. For their part, investors should start holding auditors and audit committees accountable for capital maintenance.

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Just back from a quick trip to London with James Ramsden to discuss some of the key changes coming out of the UK Budget and how these are impacting HNWI & UHNWI clients. Some of the key take aways: 1. Top jurisdictions clients are looking at: Jersey, Italy, Switzerland, and Dubai (but there are of course other options). 2. Three key areas remain important to clients: Succession, Asset protection and Intergenerational wealth transfer. Despite the budget, these issues still need managing and planning. 3. Budget changes will result in both Outflows (Non-Doms who expect a material liquidity event and those uncomfortable with the recent changes, particularly around IHT) and Inflows (Returning former residents and those who wish to access the new FIG regime). 4. Client solutions will need to be bespoke – no one size fits all. 5. Dubai/UAE remains a very attractive option for clients, particularly via the 10-year Golden Visa route (we can help with this!). #SuccessionPlanning #AssetProtection #HNWI #UHNWI #TeamTridentTrust

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A separate, but related issue, is the remuneration of PE management teams. Most C-Suite executives could earn more in big tech, they tale the risk for the equity stake. Equalise the tax regime and why would they take the risk of the rough and tumble of the Venture and PE sector. Who cares, I hear you say. Well the jobs and businesses of tomorrow thrive in the UK because of the PE sector and the EIS and SEIS regimes. It wouldn't take much for us to relinquish our position as the Third largest tech sector and third largest AI sector, others are jealous of the UKs position.

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PENSION "MEGAFUNDS" SHAKE-UP, GOOD NEWS FOR PRIVATE EQUITY? With the plans to pool assets from the 86 separate local government pension schemes into 8 "megafunds" this should mean that retirements funds can invest into a wider range of longer-term assets such as Private Equity. What does this mean for PE funds? Greater investment across a smaller number of funds? The creation of super competition for those assets? I'm no expert in this area but interested to get thoughts on what this might mean for our many clients across PE, VC and Private Debt/Credit.

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Fourth exit so far this year for Wealth Club A large US pharmaceutical company has acquired clinical trials platform Atom5™ developed by Aparito – marking the fourth exit so far this year for Wealth Club and provides our investors with average return of c 3x 26% IRR before tax relief. Wrexham-based Aparito has developed the Atom5™ software platform and app that efficiently address several problems that traditionally plague clinical trials – namely poor patient experience leading to high patient drop-out rates, patchy data, and escalating time-and-costs to completion. Patients input their own data in the app – such as medication times and dosage, and how they feel and function. Clinicians can see and speak to the patient via secure video conference, and the platform can conduct a wide range of reporting and data analysis. The technology can also generate real-time warnings if it suspects adverse events or an unexpected deterioration in the patient. Aparito’s Atom5™ platform technology already supports clinical trials in 18 languages across more than 20 countries. We extend our congratulations to founder Elin Haf Davies and her team Visit our website for information on other exits, current portfolio and investment opportunities https://lnkd.in/djAMpxY9 Wealth Club

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The Bank of England's cautious stance on LBO transactions is well-founded, especially given the current macro environment. Downturns often lead to higher insolvency rates, and the recent increase in the base rate by 500 basis points over the past two and a half years—from 25 basis points (16th Dec 2021) to 525 basis points (3 August 2023)—adds to the risk. However, amidst these challenges, there are strategic opportunities for sponsors to optimise their portfolios: 1. Interest Optimisation: Sponsors should critically assess their portfolio company's interest payments. Are they overpaying? Sponsors can strategically reduce leverage and optimise their capital stack by refinancing existing debt or exploring alternative financing structures. 2. Collateral Utilisation: Asset-based lending (ABL) transactions allow sponsors to leverage collateral effectively. Companies can secure additional financing without diluting equity using assets such as accounts receivable, inventory, or PP&E. ABL-funded transactions provide flexibility and liquidity, especially through restructuring. 3. Dividend Recapitalisation: Profitable businesses in segments where enterprise value multiples remain depressed could benefit from dividend recapitalisation. Sponsors can deliver quick returns to investors by issuing debt to fund dividends. As with any portfolio review, they need to be assessed on a case-by-case basis. ACP Cadence Advisory LLP's vast knowledge and experience in ABL can support any portfolio review including the onboarding of companies/new transactions and exploring the art of the possible.  As a trusted advisor, we represent the client (and only work for the client) and always endeavour to provide the best solution without exposure to unnecessary risk.. https://lnkd.in/ecgBfAbH #debtadvisory #privateequity #ABL #risk

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Earlier this week, the UK Takeover Panel published a new framework for ‘private sale processes’. This regime will be of interest to PE investors who may be considering potential P2P acquisitions after receiving initial soundings from management teams. I thought I'd share a few takeaways about how the new process will work, and how it fits alongside the existing public sale processes under the Takeover Code: 1) A company can initiate private talks with multiple potential buyers; 2) Those talks can remain private, but if there is speculation that the company is seeking a buyer it will need to announce that fact; 3) Any such announcement will start an offer period, but there will no longer be a requirement automatically to name all parties in talks with the company or to impose a put up or shut up deadline (subject to the next point). This is the main change and is designed to help companies and potential bidders to explore deals privately. Companies will be able to agree this treatment in advance with the Panel and tell potential bidders of this at the outset of talks; 4) However, if there is speculation which refers specifically to a potential bidder, that bidder will still need to be named in the announcement and a PUSU deadline will be set for that bidder. However the target will be allowed to announce a “formal sale process” in the event the process becomes public in which case no PUSU will be imposed on any named bidder; 5) There will still be a risk of being named if speculation refers specifically to a particular investor, so the usual steps to protect secrecy will be important. #PrivateEquity #PrivateCapital

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What a great way to start the day – joining the PwC/Arc webinar to talk about preventing UK pensions from frustrating your next M&A or restructuring deal with Atul del Tasso-Dhupelia

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Behind the Hype - How will this budget affect #deals? For #entrepreneurs selling businesses, #CGT went up 4% from today. Congratulations if you completed your deals in time (CP Deals was certainly busy!) - though in some cases this may not have compensated for lost profits or a potentially better price through more preparation. I’m left thinking it wasn’t as bad as we feared. CGT rates are pretty reasonable compared with the international landscape and significantly better than taxes in income - so I don’t think that this will be a disincentive to entrepreneurs who are often driven by the motive of creating something new and better and are not thinking at inception what the tax rate will be at #exit. For those eligible for Business Asset Disposal Relief (#BADR) on the first £1m of gain, there’s still an opportunity to reduce the CGT rate to 10% if you complete a deal by 5 April 2025 when it goes to 14% and 18% the year after. That’s up to £80k tax saving per eligible shareholder. #privateequity has also taken a hit with tax on carried interest for executives rising 4% to 32% from April 2025 and then falling within the wider income tax regime the following year (probably mid-30s %). Private equity is a massive driver of corporate deals and growing businesses in the mid-market and these measures are much less than was feared. The changes won’t be welcomed by #business but I don’t think these changes will kill the #manda markets or UK’s position as Europe’s leading #privateequity market. Cooper Parry’s fuller (& better) analysis can be found through the link below.

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Interesting insights and commentary on the outlook for the debt market with contribution from our own George Fieldhouse. Some positive signposts but no doubt much depending on the outlook for interest rates; the 30 October budget and US elections over the coming few weeks #debt

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Private Equity fund managers are being impacted by a change in HMRC’s approach and guidance on the LLP structure. Angus Wilson and Lewin Higgins-Green explore these impacts, the debate as to the costs and benefits of using an LLP and question whether this might signal a move to (or a move back to) a corporate structure. Read the insights. https://lnkd.in/edMr6PKN #privateequity

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Thanks to Actum Group for inviting me to discuss the growing importance of Management Due Diligence in not only identifying risks, but also value creation. #ManagementDueDiligence #PrivateEquity #ValueCreation Ben Rumble Paul Francis-Grey

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💸SI Partners Global has been predicting a big year for Private Equity exits💸 Friday’s announcement of OakNorth Bank and HSBC’s investment into Croud is an unexpected move; why is a PE-backed company 5 years into an investment cycle using bank debt to fund their next phase of growth? 🤔 2019 was a tipping point for PE investment in the marketing services sector – some ~£26bn across digital agencies and tech consultancies (42%), marketing services (41%) and strategic consulting (24%).    The majority of these investments (70%+) include a buy-and-build strategy to generate the returns required, and our research shows that on average PE sponsors hold for 5 years in this space.    But – the market faltered in 2023, as broader economic challenges made it difficult for sellers to exit at their expected valuations. Many saw their performance impacted by reduced client spends and this has been compounded by the increasing cost of capital from higher interest rates. Both made it more challenging to reach their valuation targets. 🎻 📉   An added complexity here is that over the last few years PE funds have been willing to apply comparatively high valuations versus the long-term averages in the sector – and which have been consistently applied by the established corporate buyers. Funds justify this on the basis that their minimum level of return is well-protected, so much of the future risk sits with management shareholders who get comfortable with it due to the generous level of cash-out they received on day one.   But at some point there needs to be another pay-day. And unlike listed companies that have a transparent share value over time, PE-backed businesses define their own internal valuation, which is used to incentivise up-and-coming management through ‘sweet equity’ and the like.   As a result, high value expectations are effectively embedded in the structure and required for an exit to make sense – especially for management sellers. But most corporate buyers are trading at lower multiples than these PE-backed groups are applying to themselves, and higher interest rates are impacting valuations for secondary investments that require more leverage.  📈 ✋🏻 🛑 So despite plenty of demand in the market from both corporate and Private Equity buyers, prices that were effectively set at the peak of the market are proving to be an obstacle to in today’s market.   Could this explain why Croud opted for bank debt to fund further expansion rather than refinancing with another fund or selling to a strategic buyer? Quite possibly.    Croud has shown strong growth but has made only a few, relatively small acquisitions since LDC invested. Having tested their value in the market, perhaps they’ve concluded that their best option is to double down on growth through M&A as an interim step until they can find the price they want. 

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