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Societies could seek private equity deals

Mortgageforce managing director Kevin Duffy says more building societies could look to emulate the deal between JC Flowers and Kent Reliance Building Society by entering into partnerships with private equity firms.

In July, US private equity firm JC Flowers agreed a deal to take a 40 per cent stake in Kent Rel-iance and invest £50m in the business. It will use the deal as a platform for more acquisitions.

Duffy says: “The market is keeping a watching brief on how the Kent Reliance-JC Flowers proposition unfolds. I would be surprised if there were not further strategic plays of this kind across the society sector.”

Duffy believes the longer the bank rate remains static, the higher the chance that some of the smaller societies will look at a similar model.

He says: “For every month there is no change in base rate, the pain for some smaller building societies remains. I think that will come to be the tipping point in whether we see further deals of this kind. If rates do not go up in the next year, it is inevitable that you will get some strategic plays occurring.”

Building Societies Association head of mortgage policy Paul Broadhead says: “The sector at the moment is leaner but stron-ger than it was. I do not think any of them will be rushing into this kind of deal in the near future necessarily.”

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There is one comment at the moment, we would love to hear your opinion too.

  1. Scott Taylor-Barr 26th November 2010 at 4:05 pm

    Is it just me, or is it sad to see the business model of mutuality disappear via these corporate buy-in type deals?

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