Accelerated Consolidation Incoming?

By Ryan Weeks on 6th February 2015

P2P/Marketplace Lending

A newly-formed company that is out to consolidate a segment of the UK's alternative finance sector is poised to stage an IPO.

Accelerated Consolidation Incoming?

Non-Standard Finance (NSF) will reportedly float on the London Stock Exchange in order to raise around £100m. The purpose of the listing? To acquire a number of the UK’s alternative consumer lending businesses. 20 potential acquisition targets have been identified, and £48m of funding has already been secured by NSF. Those funds have been contributed by Woodford Investment Management, Invesco Asset Management and Marathon Asset Management.

As mentioned, the targeted alternative lenders will specialize in lending to consumers. Of the 20 potential targets, NSF will attempt to acquire as many as 3 different lending outfits – and the first of these deals could arrive within 6 months. Approximately 12 million people in Britain do not meet the lending criteria of the high street banks – and it is this opportunity that seems to have lured NSF into the market.

Having spoken with an NSF representative, it does not appear that any marketplace lending platforms are in line to be acquired. The soon-to-list company will instead be targeting providers that specialize in a slightly riskier, higher interest variety of consumer finance than the major peer-to-peer lenders – which cater almost exclusively to prime and super-prime borrowers. NSF’s "Intention to Float" document indicates that the company intends to make a 20 to 30 per cent return on the equity acquired – with a strong flow of dividends. 

John van Kuffeler, who chairs Non-Standard Finance, commented:

"Following the financial crisis a significant part of the UK's population cannot gain access to mainstream financial services. A number of entrepreneurial start-ups began to fill the gap in the market, but many of these firms lack the capability to reach their full potential.

"By treating customers fairly, delivering excellent service and lending responsibly, we plan to establish a sustainably profitable group of businesses serving an important socio-demographic cluster."

Non-Standard Finance is of the mentality that there are many alternative credit providers that have effectively reached a bottleneck stage in their development. In order to continue their growth, the newly formed company believes that a greater level of professional management expertise and additional investment is essential. As the company itself summarized:

"NSF intends to enable its acquired companies or businesses to realise their growth potential through scaling of IT, capital, compliance and finance platforms."

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