LSL offloads mortgage and insurance brands in latest ‘simplification’

LSL has sold its mortgage, protection, and general insurance brokerage firms Embrace and First2Protect.

The brands have been sold to Pivotal Growth, which is the brand’s joint venture with Pollen Street Capital that was established in 2021 to "buy and build" a leading national mortgage broker.

Embrace specialises in the delivery of mortgage and protection advice to estate agency introduced customers, including LSL's franchised and owned estate agency branches.

First2Protect arranges household insurance for customers of LSL's estate agency division as well as third party introducers and via brokers that are members of LSL's PRIMIS mortgage network.

The consideration payable for Embrace will be seven times the earnings before interest, tax, debt and amortisation (EBIDTA) in calendar year 2024, subject to agreed working capital adjustments, capped at a maximum of £10m. 

The amount owed for First2Protect is £7.8m, which is seven times adjusted 2022 EBITDA. 

The initial proceeds of the consideration payable plus the First2Protect net cash will boost LSL’s existing cash balances, a stock market update said, which will be used to support its growth strategy.

More money from the deal is set to come in the first half of 2025, at which time LSL said it will consider the most effective use of the funds.

The acquisition of Embrace and First2Protect will “significantly increase” the number of advisers Pivotal Growth employs, expand its distribution into the estate agency market and provide additional capability in the general insurance market, the announcement said.

LSL will also retain the ability to capitalise on opportunities in direct-to-consumer financial services through its 47.8% equity share in the Pivotal Growth joint venture with Pollen Street Capital.

The value of Embrace's gross assets at 31 December 2021 was £3.8m and loss for that year was £3.2m. 

The value of First2Protect's gross assets at 31 December 2021 was £2.3m and profit for that year was £1.2m. 

The combined loss for the 2022 financial year is expected to be £1.3m, and the impact of the disposals will, therefore, not be material to the group, LSL said.

LSL chief executive David Stewart added: "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."