LDC unhampered by parent’s woes

The captive private equity arm of Lloyds Banking Group is picking up its investment pace as its parent is forced to slash jobs.

LDC, the captive private equity arm of Lloyds Banking Group, will invest “well in excess” of its previous years’ budget as the firm’s parent company – which is now part-owned by the British government – keeps faith with the asset class in a low-pricing environment.

Historically LDC has invested around £250 million (€285 million; $405 million) per year, LDC director Daniel Sasaki said in an interview.

The private equity firm is funded by Lloyds Banking Group, which is now 43 percent owned by the British state following a government bailout. The banking group has been forced to make swingeing job cuts and yesterday announced 200 redundancies, bringing the total of jobs lost this year to 7,500.

Despite its parent being part-nationalised and taking dramatic cost-cutting measures, LDC has increased the pace of its investment. “We must be the most active investor in the market right now,” said Sasaki.  LDC, formerly known as Lloyds TSB Development Capital,  has executed more deals than any other private equity firm in Europe this year, according to data provider Mergermarket. Not including a deal made public today, the firm had executed five transactions since January with a combined enterprise value of €121 million.

LDC today said it has completed its second-largest acquisition in the last 12 months. As part of a £115 million deal, LDC invested £42 million take a majority stake in 1st – The Exchange, a technology provider to the financial services industry. The deal is a carve-out from Vertex, the UK’s second-largest provider of outsourcing and technology services, which retains a 49 percent in the company.

A financing package of £40 million was provided by a trio of banks: Lloyds, HSBC and The Royal Bank of Scotland. The deal could have been done with fewer banks, said Sasaki, but having three onboard provides more funding options for future add-on acquisitions.

Over the course of the cycle “now is the time to buy” said Sasaki, who added the group’s track record with lending banks, corporate management teams and its own parent company had allowed it to up its investment pace and average deal size.