Information on the Target

Together, formerly known as Jerrold Holdings, is a specialist mortgage loan provider based in the UK, established in 1974. The company predominantly focuses on offering low loan-to-value mortgage solutions tailored for both retail and commercial purposes. Together employs a unique underwriting approach, catering to niche market segments that are often overlooked by mainstream lenders. Its product portfolio includes secured first and second lien loans, with approximately 80% of these loans backed by residential properties, while the remaining 20% pertains to commercial and semi-commercial assets.

As of December 2016, Together reported a loan portfolio of £2 billion, underpinned by parent company net assets totaling £395 million. The company's financial performance showed significant growth, with a net income of £72 million reported for the fiscal year ending June 2016, reflecting a robust increase of 22% from £59 million in the previous fiscal year.

Industry Overview

The UK mortgage lending sector has experienced a variety of transformative changes over recent years, significantly influenced by economic shifts, regulatory reforms, and evolving consumer preferences. The demand for alternative mortgage solutions has surged, particularly among individuals and businesses unable to secure traditional financing options. This shift has opened up opportunities for specialist lenders like Together, which focus on niche markets and tailored underwriting practices.

The regulatory landscape in the UK has also evolved to ensure that lenders adhere to stricter guidelines, enhancing transparency and consumer protection. These regulations have particularly impacted the operations of mainstream lenders, inadvertently driving demand toward specialized providers that can offer more flexible lending criteria. As such, companies like Together are positioned to thrive in this environment by leveraging their unique offerings.

Furthermore, the UK's competitive mortgage market continues to grow, with both application volumes and loan approvals trending upwards. This growth can be attributed to economic recovery and resilient housing market conditions, creating favorable prospects for specialized mortgage providers. Increasing consumer awareness about alternative lending options is expected to foster further expansion within the sector, particularly among businesses looking for customized financial solutions.

The Rationale Behind the Deal

The recent exit of Equistone and Standard Life from their minority investment in Together represents a strategic move to capitalize on their investment returns. The transaction enabled the realization of substantial proceeds, totaling £288 million, allowing existing stakeholders to optimize their capital structures and reinvest resources efficiently. Furthermore, the utilization of £220 million in PIK notes demonstrates the company's strategy to ensure liquidity while facilitating exit options for investors.

The involvement of HN Moser and his family in acquiring the majority voting rights underscores the aligned interests of the current ownership with the long-term objectives of the company. This shift in ownership structure allows Together to further refine its strategies and operations, potentially leading to enhanced growth and profitability moving forward.

Information about the Investor

HN Moser is an influential investor whose family's involvement in Together signifies a long-term commitment to the company's vision and growth trajectory. Their acquisition of the voting rights illustrates a strong belief in Together's market potential and the strategic advantages it provides within the UK mortgage lending sector. Moser's family background, coupled with their experience in investments, positions them favorably to guide Together through the next phase of its development.

Under the guidance of the Moser family, Together is expected to explore innovative product offerings and expand its market reach, capitalizing on the favorable conditions present in the niche mortgage sector. This ownership and management insight further enhance the company’s ability to adapt and thrive amidst the evolving landscape of the UK mortgage market.

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The exit of Equistone and Standard Life from Together is considered a well-timed and strategic decision, reflecting positively on the company’s growth and the robustness of its business model. Given Together's established track record of profitability, demonstrated by its rising income performance, the investment appeal remains strong. The focused niche in mortgage lending allows for a potentially lucrative future as market demand continues to evolve.

Moreover, the infusion of majority control by HN Moser and his family creates an atmosphere of stability and confidence in the company’s direction. Their long-term perspective is likely to bolster Together’s strategic initiatives, enhancing operational efficiencies and customer offerings, which will contribute to sustainable growth.

While there are always inherent risks in the investment landscape, Together's strong market positioning and the unique demand for its products indicate a favorable outlook. An emphasis on bespoke lending solutions tailored to the underserved market segments differentiates Together from competitors, reinforcing its competitive edge.

Overall, this strategic move is seen as a potentially advantageous investment opportunity, bolstered by Together's established foundation and the expertise of its new majority owners. The alignment of interests between ownership and operational management is expected to deliver a positive trajectory for both profitability and market share.

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