* LDC has sights on 400 mln stg of deals in 2013
* Firm remains one of the few bank-owned buyout houses
* Says investing in SMEs fits with parent bank's image
By Tommy Wilkes
LONDON, July 9 The private equity arm of Lloyds
Banking Group is targeting a record 400 million pounds
($603 million) worth of deals this year, extending one of the
last bank-owned buyout firm's reach into the UK market.
LDC has already splashed out more than 200 million pounds
this year across 12 deals including Indian tonic water brand
Fever-Tree and security bollard manufacturer ATG Access, a
success rate that equates to one in every 13 UK buyouts
completed so far.
LDC, which backs medium-sized companies, typically with
between 2 million and 100 million pounds in equity, is now
looking to break a spending record for new investment set in
2011 when it spent 360 million pounds.
Unlike rivals, which have cut the number of deals struck
since the financial crisis, the firm has ploughed on with
dealmaking to take advantage of what it says are low prices and
a rise in the number of management teams looking for an exit.
"We would do more deals if we could. Some of our best
returns have come from investing during the downturn," Chris
Hurley, one of the firm's regional managing directors, told
Lloyds had once been tipped to spin-off LDC, following
rivals like HSBC and Barclays in exiting their
private equity businesses, as part of a broader plan to shed
riskier assets and shore up a balance sheet damaged by the
But LDC remains a core part of the bank - in 2011 it handed
the parent 136 million pounds in profits, up from 69 million
pounds in 2010.
While competitors have to battle with raising funds from
external investors, restricting the number, size and timing of
doing deals, LDC raises all its equity from its banking parent.
In the past, this has irked rivals who claim it can be
difficult to compete, particularly if LDC has access to cheaper
equity funding from its parent, although the firm goes to the
market for its debt finance. Hurley disputes this and says LDC
is judged on its returns just like any other firm.
Four-fifths of its activity this year has been sealed via
its regional offices outside of London, but LDC is keen to spot
- and win - more opportunities from Lloyds' vast branch network,
which currently serves up just a handful of deals each year.
Once a company is under LDC ownership, Lloyds can also pick
up lucrative traditional banking business like providing loans
at a time when British banks have been criticised for not
lending enough to small and medium sized enterprises (SMEs).
LDC says it also using an office in Hong Kong, a departure
from its UK base that raised eyebrows when it opened in 2008, to
help UK companies expand into faster-growing Asian economies.
"If it was just about the returns, Lloyds could put the
money into other funds," Hurley said. "They like that we are
investing in SMEs. There's good profile in doing that."