"The key is that their client base tends to be very sticky, they don’t tend to buy and sell investments a lot, they are buy-and-hold investors. I do think there is a risk that being owned by private equity could dent Hargreaves Lansdown’s image.”
One challenge for any new owners is that Hargreaves Lansdown’s core business is very mature.
Barrett notes that the potential of this revenue stream has been spotted by Hargreaves management, as they have launched a cash management product, which allows clients to place cash with a range of selected banks on the platform and achieve a higher interest rate than might be achievable in a savings account.
This is because Hargreaves pools all of the clients money together and, by having such a large deposit to make, negotiates very high interest rates with banks.
Barrett said this product has been very successful.
Peel Hunt analyst Stuart Duncan says Hargreaves Lansdown has a market share of about 40 per cent. His target price for the stock is £12.20, higher than the price of £11.40 that has been accepted by the Hargreaves Lansdown board.
He says: “We still see significant potential for the platform market to grow in the coming years, with estimates suggesting that the majority of assets are still held off-platform.”
The private equity consortium has until July 19 to formalise the offer or walk away.
David Thorpe is investment editor of FT Adviser
