AS the year draws to a close the battle for control of a venerable financial services firm is set to reach a conclusion which will have resonance in Scotland.

Policyholders in the life and pensions giant that achieved renown as Liverpool Victoria will vote next week on a £530 million takeover offer for the firm from private equity giant Bain Capital.

The 1.2m members who own the firm, which is now known as LV=, are in line to receive £100 each if the proposal is accepted. This will result in the firm giving up its mutual status. It requires the support of 75% of members who vote.

The proposal has been greeted with horror by champions of mutuality, who reckon £100 is a paltry sum to accept for surrendering the benefits that go with that status. Believers reckon mutuals can deliver a much better deal for the members for whom they provide services as they are not required to prioritise the requirements of shareholders, who may only be after a fast buck.

A mutual that is a big player in Scotland is reported to be considering making a merger proposal to LV= if the Bain deal is rejected. The firm concerned, Royal London, is one of 12 said to have made bids for LV=before the company’s board decided to recommend the Bain proposal.

Royal London has 1,400 employees in Scotland. Many joined the firm as a result of its acquisition of the Scottish Life and Scottish Provident businesses, in 2000 and 2008 respectively.

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Founded in 1861, Royal London describes itself as the UK’s largest mutual life, pensions and investment company.

On its website the company says mutuality means that rather than paying out money to shareholders in the form of dividends, profits are reinvested into the organisation to the benefit of customers and its 1.2 million members.

The business has been expanding. In October it won the required approvals to take over Police Mutual.

However, success for Bain’s bid for LV= would deal a heavy blow to mutuals in their efforts to claim they are still relevant.

Royal London notes the movement started with Friendly Societies that helped people save and to prepare for potential illnesses in the days before the NHS was created.

But it recognises that mutuals now account for just nine per cent of the UK insurance market. Many have given up their mutual status in recent decades, amid the process of consolidation which has swept the sector. Companies have been keen to acquire scale in order to give them the clout required to prosper in fast-changing markets in which some well-funded consolidators have spotted opportunities.

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The process has resulted in many major players in Scotland surrendering their independence.

Dutch-owned Aegon acquired Scottish Equitable in 1994. Prudential bought Scottish Amicable in 1998 while Lloyds snapped up Scottish Widows the following year.

Standard Life demutualised in 2006 in the wake of a campaign for change initiated by Australian asset manager Fred Woollard. After the group merged with Aberdeen Asset Management in 2017 the life and pensions operations and the Standard Life brand were sold to Phoenix, which has headquarters in London and a big operations centre in Birmingham.

Further down the scale, the former Dunfermline Building Society was acquired by Nationwide in 2009 after facing challenges in the financial crisis. Airdrie Savings Bank closed its doors in 2017.

The biggest mutual with headquarters in Scotland is now Scottish Building Society, which has itself played a part in the consolidation process. It merged with the tiny Edinburgh-based Century Building Society in 2013. However, after increasing its mortgage book to £410m in the year to January, SBS remains a relative minnow.

Savings and investment specialist Scottish Friendly has expanded through acquisition in recent years. It had sales of £42m in 2020.

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Victory for Bain in the LV= saga could make members of remaining mutuals ready to listen to offers that they think could result in payouts.

This is a prospect that may cause alarm among people working in the financial services sector, in which private equity firms see lots of opportunities.

Bain’s bid for LV comes amid a land grab in the finance sector by private equity firms, which may look to squeeze costs out of the firms they buy.

Carlyle held talks with Metro Bank about a potential takeover that were terminated earlier this month.

A leading Edinburgh based player in the fast-growing investment platform market, Nucleus Financial, was acquired this year by a private equity backed rival for £145m. Employees of Nucleus opposed the deal amid ‘significant anxiety’ about the implications for jobs.

The new owner, however, has insisted the takeover will be good for growth at Nucleus.

READ MORE: Takeover of Edinburgh fintech approved after jobs impact fears

The former Standard Life Aberdeen, which changed its name to abrdn, has underlined the appeal of the platform market with a bid for Interactive Investor. This is thought to value the firm at around £1.5bn. Interactive Investor became a leading player in the market with backing from the J.C. Flowers private equity business.

In press reports at the weeked, Bain Capital suggested its proposed takeover of LV would be better for employees than a merger with another life and pensions firm, which it suggested would likely result in hefty job losses.

Supporters of mutuality may take heart from the continued success of Nationwide, which has prospered while maintaining a strong commitment to its branch network.

The building society more than doubled operating profits in the six months to September 30, to £850m, from £305m last time. The society highlighted a strong performance across its three main product areas of mortgages, savings and current accounts.

Nationwide has said it has kept a focus on efficiency and costs amid the uncertainty caused by the pandemic, while maintaining its commitment to branches. The society has around 600 branches across the UK, including 45 in Scotland. It has not closed any in Scotland in the current year.

In the interim results statement, chief executive Joe Garner said digital services are growing in popularity but Nationwide hopes branches continue to play a key role in the future.

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“Our Branch Promise means that, while we may need to close a branch occasionally, we will remain in every town or city we are in today, until at least 2023,” said Mr Garner.

He added: “We are also introducing new ways of working, to make our network sustainable for the future. These include reduced branch opening hours and multi-skilled roles where branch staff can help members over the phone and online as well as in person.”