LSL set up Pivotal Growth in 2021 as part of a joint venture with Pollen Street Capital with an aim to create a ‘buy and build’ a national mortgage broker. As part of the latest agreement, Embrace Financial Services and First2Protect are now under the ownership of Pivotal Growth.
Embrace specialises in providing mortgage and protection advice to clients introduced by estate agencies including LSL franchised and owned businesses. First2Protect arranges household insurance for customers of LSL’s estate agency division, third party introducers and brokers who are members of LSL’s PRIMIS mortgage network.
The consideration payable for Embrace with be seven times its earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024 capped at a maximum of £10m. The consideration payable for First2Protect is £7.8m, which is seven times its adjusted EBITDA for 2022.
The initial proceeds of the consideration payable plus First2Protect’s net cash will be added to the group’s cash balances and used to support LSL’s growth strategy. This will be payable in cash to LSL during the first half of 2025 which is when the group will consider the best use of the funds.
The disposal of these firms make up LSL’s aims to simplify its strategy and focus its financial services activity on B2B services through its network.
It also said Pivotal Growth was “better placed” to increase the value of the firms. LSL will continue to benefit from the businesses through its 47.8 per cent share in Pivotal Growth.
The value of Embrace’s gross assets as of 31 December 2021 was £3.8m and its loss was £3.2m, First2Protect’s gross assets were worth £2.3m as of 31 December 2021 and its profit was £1.2m. The combined loss for the financial year 2022 is expected to total £1.3m which will not have an impact on LSL.
Pivotal Growth has acquired eight broker firms since its launch including the transferal of new build advice companies Group First and RSC from LSL.
David Stewart, chief executive of LSL, said: “I am pleased to confirm the transfer of Embrace and First2Protect to Pivotal Growth. This marks another significant step in our work to simplify the group, whilst we focus on taking advantage of the exciting opportunities available to us across each of our divisions, including our financial services network business.”
