Joint venture adviser Pivotal Growth has acquired mortgage and protection brokers RSC New Homes Limited and Group First Limited, the holding company for Mortgages First and Insurance First, from LSL Property Services in a deal worth up to £20m.
Pivotal Growth, which is a joint venture between LSL and private equity investor Pollen Street, will pay seven times the combined Group First and RSC earnings before interest, taxes, depreciation, and amortisation (EBITDA) over the 2024 calendar, capped at a maximum of £20m.
It will be paid in cash to LSL during the first half of 2025, at which time LSL said it will consider the most effective use of the funds.
Pivotal Growth said the new purchases complemented its acquisition of Northampton-based new build specialist Grange Mortgage and Protection Services last year and expand the group’s capability and coverage in the specialist new-build space.
LSL revealed it paid £800,000 to acquire the remaining 30% in RSC New Homes it did not hold following its initial 2018 investment. This facilitated the subsequent RSC sale to Pivotal Growth.
Moving forward, LSL added it will continue to account for its 47.8% equity share of Pivotal Growth profits after tax, which will include the profits generated by Group First and RSC. LSL will also benefit from the incremental profits of Group First and RSC in any future Pivotal Growth sale.
LSL said the sales were in line with its strategy to simplify the group, and to focus on developing further its Financial Services Network business, adding it believes that Pivotal Growth is better placed to increase the value of Group First and RSC.
According to LSL, for the 2021 financial year, the value of Group First’s gross assets was £15.2m and profit for the year was £1.4m.
The value of RSC’s gross assets at 31 December 2021 was £3.7m and profit for the year was £0.7m.
Combined profit for the 2022 financial year is expected to be £0.7m, and the impact of the sales will, therefore, not be material to the group.
Simon Embley, chief executive officer of Pivotal Growth, said: “I am delighted to welcome RSC and Group First into the Pivotal Growth group and to start the year with the strong momentum of two acquisitions.
“Through investment in their people, systems and technology, we plan to organically grow these businesses to further cement our position as a leading player in the new homes market, where we will continue to explore opportunities in the future.”
Alison Winterburn, managing director of RSC, said: “This is a great opportunity to work with Simon and his team at Pivotal Growth which will bring us new distribution opportunities and access to technology in order to grow the business”
Ian Bush, managing director at Group First, added: “We are very excited at the prospect of becoming part of the Pivotal Growth group which will help us build on our relationships with new build developers.”