Interactive Investor delivers £1.5 billion exit
MMC first invested in Interactive Investor (II) in 2010. At that stage II was primarily an investment information business with two print magazines (MoneyWise and Money Observer) and an active investor online bulletin board, but with all brokerage execution outsourced to Halifax Share Dealing. It did, however, have a well-known brand, and building a brand in retail financial services takes a lot of capital and time (see Nutmeg). In addition, the secular trend towards low cost self investment and execution was building momentum. These were the two principal drivers of our decision to invest.
II had a colourful history: it was started in the mid 1990s and claimed to be the first financial services website to execute a trade online. It rode the internet bubble, listing in New York, and was then acquired by Australia’s largest insurance company, which subsequently sold it back to the co-founder at a nominal price after the bubble burst.
Our investment was used to develop the technology platform that would allow II to bring the outsourced execution in-house and boost profitability: customers were charged £10 per trade and Halifax took 60% of that.
The business progressed slowly with several bumps in the road requiring further capital injections from MMC and the large group of long suffering angel investors. It then became apparent that the highly fragmented retail financial services market was heading for consolidation and II would either be acquired or would need to start acquiring. We opted for the latter (not a difficult decision as the business would have fetched a low price at that point) but this required a change of management. MMC played a major role in that transition, bringing in Richard Wilson (the CEO), who has done a phenomenal job in building the business to its sale to Abrdn, and a highly effective chairman, Hugo Van Vredenburch. We also had to fend off an attempt by a major competitor to acquire a stake from departing management. It was clear that was not a friendly move. Peter Dicks, a significant angel and board member, and MMC facilitated the purchase of the management stake by Unicorn VCT and Augmentum respectively. Augmentum’s founder, Tim Levene, joined the board and played an important role in helping drive the business forward.
The opportunity arose to acquire TD Online in the UK from Toronto Dominion Bank. The acquisition cost was beyond the capacity of existing investors and the investment bank advising II sought to raise capital in the City, but there was no investment appetite for a combined group that would be heavily loss making initially and take a forecast two to three years to achieve profitability. Through a mutual connection MMC approached JC Flowers, a financial services-focused private equity firm, and it immediately saw the opportunity. After extensive negotiations and regulatory delays the deal was secured and the platform established to lead the consolidation of the sector. Management, led by Richard Wilson and Barry Bicknell (CFO) did an outstanding job in rapidly bringing the combined group to profitability, which allowed II to acquire and integrate Alliance Trust Savings followed by The Share Centre and, most recently, the EQi book of customers from Equiniti. Today, II is second only to Hargreaves Lansdown as a direct to consumer financial services platform with over 400,000 customers and AUA of £55 billion. It is the leader in fixed subscription-based fees, making it by far the most cost effective broker for investors with over £25,000 to invest. This is the dynamic and highly profitable business that Abrdn has acquired for £1.49 billion cash.
MMC is proud to have worked closely with other stakeholders to ensure that II’s potential could be realised. The story is a powerful endorsement of the benefits of patient and engaged capital.
Read more on the acquisition via The Times.