Every week, Charlie Conchie sits down with the biggest names in financial services. This week, it’s Hargreaves Lansdown co-founder Peter Hargreaves.
A takeover bid emerges in London – cue complaints over meagre price tags and unadventurous investors.
But not so for Peter Hargreaves, the outspoken co-founder of retail investment platform Hargreaves Lansdown. The 77-year-old billionaire stepped back from the board of Britain’s biggest retail investment platform nearly ten years ago but has remained a 20 per cent shareholder and a painful thorn in the side of new management looking to stamp their mark.
Now he and his co-founder Steve Lansdown have said they are open to a £5.4bn offer from a consortium of big name private equity buyers led by CVC.
Is it because their cherished creation was unappreciated by London’s equity investors?
“Given the state of the business, the share price was right,” Hargreaves tells City A.M.
“For the first time in Hargreaves’s history, it reported a reduction in profit. We had never, ever had that issue. A company where the profits are going down, is not very valuable,” he adds.
Peter Hargreaves, co-founder of Hargreaves Lansdown
The FTSE 100 firm is on the cusp of a buyout after a tumultuous period in which soaring costs and a largely ill-fated pivot into ‘robo-advice’ have eaten into earnings.
Profits slumped to £269m in 2022 in the final full year of former chief Chris Hill’s tenure before rebounding to a five year high of £403m in 2023. While shares are down over 50 per cent from a 2019 peak, they have rallied over 46 per cent since Dan Olley took the reins last August.
If this business could survive Hill, and very few could, it can certainly survive private equity
Hargreaves has made no bones about his dismay at Hill’s leadership. He and former chair Deanna Oppenheimer have been variously labelled as “useless”, a “shambles” and overseeing a strategy that is “rubbish”.
While some might fear the ruthless streak so commonly attached to private equity buyers, he reckons the only way is up.
“If this business could survive Hill, and very few could, it can certainly survive private equity,” Hargreaves says.
“He was completely incapable of running the business,” he adds. “He had not got a clue. And from what I gather, he’s left an absolute mess of inefficiencies, overstaffing [and] jobs with titles that you wouldn’t know what they did.”
former Hargreaves Lansdown chief Chris Hill
Hargreaves says Hill and Oppenheimer thought “doing the opposite of everything” he and his co-founder did would work.
“Why on earth would they think doing the opposite would work?”
Questions over its strategy have also come at a time in which investment platforms are under pressure over fees and skittish consumers have been wary of the markets. While Hargreaves Lansdown still holds a forty per cent share of the market, cheaper peers like Interactive Investor and AJ Bell are snapping at its heels and a host of flashy start-ups are targeting younger investors.
The public barbs have not been welcomed by Hargreaves Lansdown as it looks to steady the ship. In October, the company set out protocols on its interaction with its co-founder to try and take the heat out of his public slanging.
The terms of the deal would look “to ensure a common understanding of how interactions will take place,” the board said at the time.
While Hargreaves says he is warmer to Olley’s “infinitely better” leadership, it’s unclear whether he has fully bought into the spirit of the deal.
All I want Hargreaves Lansdown to be is a company that’s successful and looks after its clients
Whether Hargreaves will sell his stake in the potential takeover is a question he’s yet to answer. Whether heavyweight dealmakers at CVC, Nordic Capital and the Abu Dhabi Investment Authority would put up with the public jibes is another.
A private equity sale will mark a watershed change in direction for a company that has been a mainstay of the London Stock Exchange since 2007 and a member of the FTSE 100 since 2011, save for a brief relegation at the end of last year.
A fourth bid at 1140p per share looks set for the greenlight from the company’s board who said yesterday they were “willing to recommend” the deal to shareholders. The buyout firms are now conducting a deepdive of the books before tabling a firm deal.
It will be “easier to sort out a company that needs a lot of efficiencies” away from the glare of public markers, Hargreaves adds – it may also offer a route to tempt talent with more lucrative pay packets.
However, the deal will be another blow to the London Stock Exchange which has seen more than £100bn worth of companies ripped off the market this year in a torrent of exits and takeovers.
Bids for some of London’s biggest companies have ramped up in recent months as both private equity and corporate buyers look to capitalise on a downturn.
Is he regretful or dewy eyed over leaving the London Stock Exchange?
“All I want Hargreaves Lansdown to be is a company that’s successful and looks after its clients,” he insists. “That was the main criteria myself and Stephen had when we set this business up.”
Shareholders will now have to wait for a firm bid to see whether that exit becomes a reality. Hargreaves insists he’s out of the loop on the terms of the deal but he and his co-founder have suggested it will have their backing.
“I would be delighted if I was consulted,” he adds. “So if they wanted to ask me questions relevant to the business, I would be delighted.”
Could a comeback in some capacity therefore be on the cards under new ownership?
“I’m 77,” he says bluntly.