Outlook: Satchell flexes muscles and overpays

IT'S NICE to see the trend of recent years being reversed and a mutual insurer bidding for a proprietary one. Perhaps mutuality isn't dead after all. In one leap the big three mutual life companies - Standard Life, Scottish Widows and Equitable Life - are transformed into the big four. Even so, the question ought to be asked whether or not Friends Provident is overpaying for London & Manchester, and apart from that of simply getting bigger, what the purpose of this takeover is.

On the first score, Friends is certainly paying a very full price; the stock market would be wrong to assume Britannic, or any of the others that might seem to make a better fit, is prepared to bid more. L & M has been hawking itself around all this year. Having spoken to three or four prospective suitors, this was the best price it could come up with.

On the second question, Keith Satchell, chief executive of Friends, stresses the benefits of putting together his own direct sales force with L & M's home services business, the staff of 800 it employs to go from door to door collecting premiums. In truth, however, these are quite different businesses, appealing to widely different income groups. It is not clear the synergies, or the scope for cost cuts, are that great. There does seem to be logic in merging the two corporate pensions operations, which tap into different areas of the IFA market, but whether that is of itself enough to justify the bid premium, is a moot point.

Certainly if Friends was a proprietary company, Mr Satchell might have had difficulty in selling this deal to his own shareholders. As it is, he doesn't really have to answer to anyone. The bull market in equities has given him the capital necessary to do this deal, he doesn't have to consult his policy holders and there's even a limit on what regulators can do to interfere in his deal making.

Friends has itself long been thought a potential target for a proprietary company, and it's hard to resist the conclusion that this takeover is essentially defensive in nature. Life assurance, as much as any sector, has entered a bid or be bid for phase, so Mr Satchell can hardly be blamed for wanting to get his shots in early. In many respects, it's good to see a mutual flexing its muscles in this way and showing a bit of ambition. This is Mr Satchell's second big takeover, the first being Ivory & Sime.

All the same, mutuality is no protection against the consequences of overpaying, and if that is indeed what Mr Satchell is doing, then policy holders won't thank him for it.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths surrounding the enigmatic singer
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn