One was founded in 1843 to help poor families in the North West bury their loved ones with dignity. The other is a rapacious private equity giant born in the ‘greed is good’ heyday of the 1980s.
Little could the founding members of Liverpool Victoria, one of the best-known and oldest mutuals, have contemplated that one day they would be forced to confront the financial might of an outfit like Boston-based Bain Capital.
The origins of LV, which provides pensions, life insurance and investment funds to 1.2million policyholder owners, could hardly be further from the future it faces under the ownership of swashbuckling vulture capitalists.
But it is now threatened with becoming the latest victim of the pandemic plundering of British firms by foreign private equity giants, using the chaos wreaked by coronavirus to pick up prized assets on the cheap.
This one was started in 1843 by poor North West families to provide dignity burials for their family members. Photographed: An image of a street scene in Liverpool in the 1980s
The story of our family begins in Liverpool, England 178 years ago, when William Fenton (36-year-old customs officers) founded the Independent Legal Burial Society. For many decades, they were best known for their ‘penny policy’ life insurance, which saw agents travel door to door to collect premiums.
People could insure themselves or their children’s lives for as little as a penny a week, and, when they died, the society would pay toward a funeral. By 1863, the society’s work had extended as far as Plymouth, London, Scotland and across to Ireland.
In the early 20th century, Liverpool Victoria was approved to administer a system of compulsory health insurance for the working class – one of the precursors of the modern welfare state. It was managing 13 million policies by 1930 from new offices located in Bloomsbury (London).
The company today is called LV=. It was born out of a fashionable rebrand in 2007 as well as heart-warming ads featuring lime green cars, and now the famous green heart of the LV.
It has 5,500 staff, more than three times the number it had 15 years ago, and is now the UK’s second biggest mutual insurer.
Mission: LV was established to aid the Liverpool poor during the reign of Victoria
The water fountain is located opposite the “Morning Star” public house at the corner Of Richmond Row And Byram Street, Liverpool. This allows young boys to take some down time.
But LV’s honourable role in the history of the mutual movement contrasts sharply with Bain Capital, a rampaging profit- hungry private equity outfit. Mitt Romney, a former White House hopeful, founded this US-based giant with the intention of investing in some of the most important companies. Mr Romney quickly went about building a team of dealmakers who mostly resembled him – young, alpha male Harvard Business School graduates who lived for the thrill of a deal and were hungry for money.
It was a successful strategy that paid off. The firm has grown rapidly to become a giant, with over 1000 employees. It counts itself among the Masters of the Universe – alongside other private equity giants such as Carlyle Group, KKR and Blackstone.
For years, Mr Romney was president and managing partner and would often brag about having ‘dictatorial powers’ at the firm.
It made him great wealth – put at £185million – and allowed him to run for the White House in 2012, when he lost to Barack Obama. Bain’s aim is to prey on underperforming companies, turn them around and offload them for a profit.
But the firm has left a trail of destruction in its wake and is responsible for bringing some of the world’s household names to their knees by loading them up with debt and leaving them to crumble. This form of financial piracy is known as a ‘leveraged buyout’, and it achieved iconic status thanks to Gordon Gekko in the film Wall Street.
For years, Mr Romney was president and managing partner and would often brag about having ‘dictatorial powers’ at the firm
Perhaps the worst example of Bain’s practices was Toys ‘R’ Us, which the firm bought alongside KKR in 2005 using £3.9billion of debt. The firm declared bankruptcy in 2017 after things began to go sour. It was one of the worst private equity transactions in history.
Bain’s secretive nature means that its partners don’t carry business cards, and their clients are only known by their code names. Old Wall Street hands even refer to it as the ‘black box’ and ‘the KGB of private equity’. The leader of Bain’s bid, Matt Popoli, is making a career out of demutualisation, having led the buy-out of John Hancock, a mutual that played a prominent role in the fabric of Boston life.
If LV members give the deal the green light, their mutual will be set upon by Bain’s consultants, swarming around everything from computer systems to calculating the profitability of the canteen.
Bain could slash costs by cutting staff or, like Toys ‘R’ Us, potentially pay itself mammoth dividends.
If pension assets were sold and hidden in anonymized funds, the mutual relationship between members and managers could end. LV’s website boasts: ‘Our founder, William Fenton, would be proud of his legacy.’ The mutual’s members have the power to ensure that is still true in a month’s time.