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Friends Life puts Sesame up for sale

Higginson-George-2011-700x450.jpg
George Higginson

Friends Life has put Sesame Bankhall Group up for sale and appointed Barclays Investment Bank to find potential buyers for the business.

Money Marketing understands Barclays is contacting a number of firms to gauge interest with a private equity led management buy-out bid seen as one option.

Friends Life bought Sesame from software company Misys in May 2007 for around £75m and took on all past liabilities as part of the deal.

In October 2009, Sesame completed the acquisition of Bankhall and PMS from Skandia and rebranded as SesameBankhall.

In August 2011, Friends announced it was splitting its operations between an open book and closed book of business, which saw Sesame Bankhall Group executive chairman Ivan Martin report to the UK Heritage Business. George Higginson was promoted to chief executive of SBG in November 2011.

SBG’s latest accounts show the group made a trading profit of £2.2m in 2011, down 56 per cent from £5m in 2010. The firm’s network arm Sesame Limited made a loss of £2.5m. It paid out £11.4m in claims and set aside £7.4m for future complaints.

Investec analyst Kevin Ryan says life companies are unlikely to take an interest in acquiring Sesame unless they can guarantee distribution through its advisers.

He says: “There is an enormous question over the entire industry and it is an extremely difficult time to try and sell an advice business the size of Sesame.

“It is out of the question a life company would consider this unless they could ensure everything was going into their products, but that would not suit individual Sesame advisers.”

Access Wealth Management partner Jim Clancy says: “This shows SBG is not vital to Friends Life’s strategy. A management buyout is a strong possibility, alongside a private equity firm.”

Friends Life, Sesame and Barclays all declined to comment.

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Comments

There are 27 comments at the moment, we would love to hear your opinion too.

  1. Inevitable really. Who would want to own it? Wildly fluctuating and unknown liabilities together with revenues that are barely predicable. All for low single digit returns.

    No wonder the the IFA profession seems to be a reverting to that of a cottage industry.

  2. Interesting.

    There are two stories on MM today that confirm the affect of the RDR. One is how profits at Hargreaves Lansdowne have soared by 30%. I guess it’s a case of being in the right place at the right regulatory time.

    Alternatively there is this one from Friends Life, who one suspects with Sesame has found itself in exactly the wrong place at the wrong time.

    Good luck with the sale boys! I doubt you’ll find anyone as generous as you were when you bought Sesame from Mysys along with all of its liabilities.

  3. I’ll start the bidding with 50p.

  4. This is interesting on several levels.

    Is this sought for disposal any refection on Friends Life’s (and hence Resolution) view on the RDR?

    What was the real original cost? £75million plus liabilities. How much were the liabilities and are there any now?

    These figures are important for a clear picture as if the firm is sold at a profit it will lead to one conclusion, if at a loss – an entirely different one.

    It will be interesting to see the drama unfold. I certainly wouldn’t relish being a member of this network. Talk about being hawked around as if in a slave market! (And not for the first time).

  5. If I was them I’d take anything Barclays Investment Bank offers them as protection as in a few years time there will be another scandal and they will be able to claim millions…..

  6. Is there not a fundamental conflict of interest if the primary reason for life companies buying an IFA network is to guarantee distribution of their products through the network’s member firms? What if those products are, shall we say, not very good by comparison with the best of the rest available from other providers?

  7. simon chamberlain 6th February 2013 at 9:40 am

    do you think any of the members or advisers will get any of the money from the value they created ? answers on a postcard please !

  8. Well, I suppose I could do something with it – give me a tenner and I’ll take it off your hands.

  9. I forgot to mention that those chaps at Succession will probably outbid me. They would be able to cherry pick the members with assets under influence, ratchet up the margin on the platform to 1%+ and sweat the paper thin equity of client loyalty in an IPO at an unspecified point in the future.

    Still, my offer of £10 is at least a concrete one.

  10. I suggest they take the offer from anon@9.14.

    I would want them to pay me a lot more than ten bob to take it off their hands!

  11. To anonymous, on 6 Feb 2013 9:14 am with the bid of 50p, how would you like your change?

  12. They may find a buyer, but I bet it won’t be one prepared to accept past liabilities, at least not without FL leaving a large pot behind.

    More evidence, if it were needed, that the Network model is well and truly bust, and that the large, fixed fee support services Companies aren’t offering a service that IFAs want, need, or are prepared to pay high fees for.

  13. @Soren – liked your post Soren, although I think Hargreaves has done more than just being in the right place at the right time … It’s being doing something really well that I feel advisor firms need to do better now consumers will be paying explicitly for their services – marketing. However close to the line of advice it get’s, we’ve got to admire its compelling approach.

  14. the double edged sword is that some who might be interested will try to avoid past liabilities, either as part of the sale, or at a later date. The regulator needs to be really careful here

  15. Sesame is a major contributor to APFA. They must be worried. Is it ever wise in any business to rely on too small a pool for your income?
    That apart this is indeed a seismic event for the industry.

  16. It seems to me that this is totally a non article.

    None of the parties referred to in the editorial have made any form of comment either at any point.

    it must be a slow week for the editorial people at Money Marketing!

    Perhaps the peopl

  17. Sesame are paying out £1 million a month in compensation! Who wants to buy that? I’m a former DBS member and I have to say I’m not surprised, the compliance officers there had the intellect of a failed big issue salesmen.

    Networks are finished.

  18. @ Simon Chamberlain:
    The firm’s network arm Sesame Limited made a loss of £2.5m. It paid out £11.4m in claims and set aside £7.4m for future complaints.
    The defence rest’s m’lud

  19. Just what I expected though earlier than I thought.

    Wonder if they are only now just realising that a network post RDR is just not really a viable business model worth keeping.

  20. simon chamberlain 7th February 2013 at 8:24 am

    Isn’t it time for all you good network members to have a conversation with Succession , we can show you how to control your own world , and truly put yourself in a position for the new world where you own the capital and decide the enviroment you work in . Rather than be peddled around the market by these networks that claim they own you ! Check out Successions website and talk to John Kilburn Toppin . Do it for yourself before someone else flogs your asset again .

  21. simon chamberlain 7th February 2013 at 9:05 am

    isnt it time for all you good network members to stop making other people rich and put yourself in a position where when a acquisition takes place its you who benefit rather than the owners of the defunct networks who claim to own your business! please speak to john kilburn toppin on 07775716040 he can show you how , before its to late again !

  22. The right network model will work, it is the pass liabilities that are the issues and who wants to buy liabilities as it just eats up profits.

  23. RegulatorSaurusRex 7th February 2013 at 9:41 am

    I’ll take it on if they underwrite the £billion or so of liabilities.

  24. As an AR of Sesame it comes as no surprise they want to offload us all to some asset stripping company ,Lets hope Ken Davey still got a few quid

  25. Paul Stone. Do you think Ken wants to buy back his old dbs liabilities? Why do u think he flogged it to the yanks in the first place?

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