In thirty years of financial journalism, I’ve never seen a deal as bad as the LV takeover

As members face last-chance vote to save venerable mutual

Until recently lV, the insurance firm once known as liverpool Victoria, was chugging along in the backwaters of UK finance, viewed with deep affection if little excitement.

now, the 178-year-old mutual is at the centre of an acrimonious battle in which its future is at stake — and much more besides.

By the end of this week the fate of the business — the target of a £530million bid from U.S. private equity firm Bain Capital — will have been decided by a poll of its 1.2 million policyholders.

this is an important moment for savers, who entrusted their money to lV on the basis it was a mutual owned by the members, not a mere plaything for profit-hungry buyout barons.

Members have until 2pm today to vote online or by post and can also vote in person at an online meeting on Friday, December 10.

naturally, the takeover is a huge concern to members, some of whom have substantial savings built up over years. Many have contacted the Mail to protest about the deal, which has also attracted criticism from prominent politicians and financial experts.

But the repercussions go much further. We should all be concerned about the upshot, whether or not we have savings with lV.

the vote will be a watershed. not only for the once-proud, now greatly depleted UK mutual sector, but also for private equity, which has devoured British businesses worth tens of billions of pounds almost unchecked. those that have fallen to private equity include supermarket group Morrisons and defence company Cobham.

Even by the standards of private equity takeovers, which include disasters such as Debenhams and collapsed care-home chain Southern Cross, the lV situation is shocking. in three decades of financial journalism, i have covered many bids and deals. Yet i cannot recall another as confused and unconvincing.

For once, most of the blame does not lie with the private-equity panjandrums. After all, Bain is just plying its trade. the true culprits are lV’s chairman Alan Cook and chief executive Mark Hartigan, whose laughable performance makes them look like the laurel and Hardy of mutual insurance.

the duo ought to have respect for the members who pay their large salaries. But both have, in City lingo, ‘skin in the game’ — a personal stake in Bain’s success. Cook has been hoping to carry on as chairman on a £205,000-a-year salary, and Hartigan aspires to stay as chief executive with an equity stake that could be much more lucrative than his current £1.2 million annual package.

Yet they are asking their members to surrender their ownership of the business for the derisory sum of £100 apiece. in fairness, the possibility of future rises in policy values is also being dangled, though this is not guaranteed.

Unhappy savers may feel it is worth passing up that paltry £100 to thwart Cook and Hartigan, who appear desperate to steamroller through their dubious deal. they have even gone to the lengths of gerrymandering the poll by trying to ditch a key voting hurdle designed to protect members’ interests.

their constant refrain is that Bain is offering the best option for policyholders and staff. true, the buyout firm has said it will not load lV with debt and that it will keep the brand.

it also claims it will be best for jobs and provide new investment, though the money earmarked to go into the business for future growth comes from the insurer’s own coffers. And previous private equity deals have shown pledges on jobs are often not worth the paper they are written on. According to Cook and Hartigan, lV lacks the financial firepower to survive on its own — interesting, as until very recently they were insisting it had good prospects as an independent mutual.

But they have still failed to produce a convincing explanation of their decision to turn down the chance to team up with a fellow mutual, Royal london.

Many aspects of the Bain deal fly in the face of mutual principles, including ownership through a Jersey tax-haven company and the short-termism of the private equity business model.

City regulators, who should have been watching this like hawks, have not seen fit to intervene.

By rights, however, there should be a full investigation into the shambolic conduct of the proposed sale and into whether members are being short-changed.

that said, there is probably no perfect outcome for lV savers.

it is not clear what will happen if the Bain deal is voted down, but Royal london has signalled it may field a fresh proposal. Hartigan and Cook would almost certainly be turfed out and the regulators should ensure credible figures replace them.

not all private equity is bad — it can be a success, as in the case of Worldpay, a high-tech offshoot of Royal Bank of Scotland. nor are all mutuals wonderful. Equitable life and the Co-operative Bank both famously fell into financial difficulty and disrepute owing to poor leadership.

However, if lV falls to Bain, it will be a body blow to what is left of a mutual sector that is still a valuable part of consumer choice.

Former mutuals such as Halifax, Bradford & Bingley and Alliance & leicester succumbed to greed two decades ago when they floated on the stock market. All were wiped out in the financial crisis.

it will be a tragedy if the loss of lV gives carte blanche to private equity predators to hunt down the remaining big mutuals.

THE lV deal should be a turning point in the invasion of private equity, which has been gobbling up many of our best-known firms. Well-known names such as Marks & Spencer are seen as targets.

it should also help check avaricious company chief executives who stand to make millions by selling out, and the supine boards who give them the nod.

Bosses have every incentive to roll over when private equity comes calling, as they are often in line for large payouts on options, or a chunky share stake from the new owners.

in most cases, customers have no say. Deals are decided by big City institutions, which have little regard for mutuality, jobs or the national interest.

lV is different. the bosses may have been relying on apathy to get their way, but the savers do have a voice. i hope each considers the bid carefully, then uses their vote.

For if they dismiss this rotten deal, it will be a defeat for highhanded bosses and a victory for small-saver democracy.