Lloyds Banking Group (Lloyds, or the Group) today announces that it intends to acquire the Embark Group (Embark), a fast growing investment and retirement platform business. Embark enhances the Group’s capabilities to address the attractive mass market and self-directed Wealth segment, completing its Wealth proposition. Embark will also enable the Group to re-platform its pensions and retirement proposition, delivering a market-leading platform for intermediaries and significantly strengthening its offering in Retirement, an important growth market.
As announced within Strategic Review 2021, the Group aims to meet more of its customers’ broader financial needs, whilst retaining more of the c.£10 billion assets under administration which customers invest with third parties each year. The acquisition of Embark will deliver a modern, industry-leading mass market, direct-to-consumer proposition, complementing the Group’s existing advice offerings through Schroders Personal Wealth and Cazenove Capital. The acquisition will see the Group acquire c.£35 billion of assets under administration on behalf of c.410,000 consumer clients.
The Group is targeting a top-three position in direct-to-consumer self-directed and robo-advice business in the medium term. The Group is also targeting a top-three position in the individual pensions and retirement drawdown market by 2025. The acquisition of Embark transforms the Group’s ability to achieve these objectives. As a consequence, the Group is increasing its Strategic Review 2021 net new money target from £25 billion to c.£40 billion by 2023, to reflect its increased growth potential.
Through a combination of the Group’s new capabilities and its multi-brand, multi-channel distribution model across more than 25 million customers, the Group expects this acquisition to deliver attractive growth and returns over time and create value for shareholders. A consideration of c.£390 million will be paid for the entire share capital of Embark upon completion. The transaction is expected to have a c.30 basis points impact on Group CET1 capital and deliver a mid-teens return on invested capital in the medium term, both including all integration and restructuring costs.
The transaction is being cash funded from Lloyds’ strong capital position. At half year 2021, the Group reported a CET1 ratio of 16.7 per cent, significantly ahead of the ongoing target of c.12.5 per cent, plus a management buffer of c.1 per cent.
The transaction does not include the Rowanmoor SIPP and SASS administration business, which is being retained by existing shareholders. This represents c.£5 billion out of over £40 billion assets under administration. Lloyds looks forward to continuing to work closely with Embark’s existing asset management partners, BlackRock and Franklin Templeton.
Subject to regulatory approvals, the acquisition is expected to complete in the fourth quarter of 2021.
Antonio Lorenzo, Chief Executive, Scottish Widows and Group Director, Insurance & Wealth, Lloyds Banking Group said: “There’s an ever-growing customer demand for clear, simple and affordable financial planning and retirement products and services. Our acquisition of Embark will not only help us serve all of a customer’s financial needs in one place, but also sit alongside our existing partnerships which meet the more complex financial planning and investment requirements of mass-affluent and high net-worth customers through Schroders Personal Wealth and Cazenove Capital.
“Through Embark’s technology, we will be able to increase the reach of our investment offerings for customers who are happy to manage their own portfolios, through modern, easy to use technology. We will also be able to enhance our intermediary proposition, strengthen our offering in Retirement and modernise the way Scottish Widows works with advisers, recognising the continued value of advice.”
David Barral, Chairman of Embark Group commented: “In eight short years, Embark has built one of the most respected and fastest growing digital retirement and savings businesses in the UK. The combination of Lloyds Banking Group’s financial strength and distribution reach, with the agility, digital capability and expertise of Embark, will provide the perfect opportunity to create a market-leading proposition for consumers, intermediaries and strategic partners.”