Peter Beaumont, Sales & Marketing Director of Mortgages plc, explains: “The UK’s leading packagers have successfully defied critics predictions that regulation would bring about their demise. The next challenge facing the directors of these businesses is to find ways to inject real value into their companies.
“The value of a packaging business will currently be many times lower than the value of a similar sized lender. A strategic option which directors of super packagers should seriously consider is to become lenders in their own right, which will have a significant impact on the market value of their businesses. Historically, this option has been out of reach because of the high and expensive barriers to entry.”
Mortgages plc cites Freedom Finance as an organisation which has successfully made the transition to being a lender. The PMPA and The Finance Centre, amongst others, have also recently stated they are interested in the possibility of becoming lenders.
Beaumont continues: “One of the key issues for packagers who may be considering this option, is putting together the various pieces of the financial jigsaw. Packagers will require additional capital, warehouse funding lines, an IT platform and a partner who is willing to buy their mortgage production. Organisations such as Mortgages Plc, backed by Merrill Lynch, are in a unique position to be able to offer a package which encompasses all of these key ingredients. We’d be interested to talk to any packager which is considering lending as a strategic option for the future.”
However, Beaumont has also issued a word of warning: “Becoming lenders is an option which can only be considered by the very largest packagers. It requires a different set of management skills as well as considerable investment in systems, staff, training and operational infrastructure. It is not a decision to be taken lightly, but neither is it a strategic option which should be overlooked.
“Many packaging businesses are owned and run by entrepreneurial directors who harbour the dream of turning their company into hard cash at some point in the future. This is one way to turn that dream into a reality and realise the full value of the business.”
