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* LDC has sights on 400 mln stg of deals in 2013
* Firm remains one of the few bank-owned buyout houses
* Says investing in SMEs fits with parent bank's image
By Tommy Wilkes
LONDON, July 9 (Reuters) - The private equity arm of LloydsBanking Group is targeting a record 400 million pounds($603 million) worth of deals this year, extending one of thelast bank-owned buyout firm's reach into the UK market.
LDC has already splashed out more than 200 million poundsthis year across 12 deals including Indian tonic water brandFever-Tree and security bollard manufacturer ATG Access, asuccess rate that equates to one in every 13 UK buyoutscompleted so far.
LDC, which backs medium-sized companies, typically withbetween 2 million and 100 million pounds in equity, is nowlooking to break a spending record for new investment set in2011 when it spent 360 million pounds.
Unlike rivals, which have cut the number of deals strucksince the financial crisis, the firm has ploughed on withdealmaking to take advantage of what it says are low prices anda rise in the number of management teams looking for an exit.
"We would do more deals if we could. Some of our bestreturns have come from investing during the downturn," ChrisHurley, one of the firm's regional managing directors, toldReuters.
Lloyds had once been tipped to spin-off LDC, followingrivals like HSBC and Barclays in exiting theirprivate equity businesses, as part of a broader plan to shedriskier assets and shore up a balance sheet damaged by thefinancial crisis.
But LDC remains a core part of the bank - in 2011 it handedthe parent 136 million pounds in profits, up from 69 millionpounds in 2010.
While competitors have to battle with raising funds fromexternal investors, restricting the number, size and timing ofdoing deals, LDC raises all its equity from its banking parent.
In the past, this has irked rivals who claim it can bedifficult to compete, particularly if LDC has access to cheaperequity funding from its parent, although the firm goes to themarket for its debt finance. Hurley disputes this and says LDCis judged on its returns just like any other firm.
Four-fifths of its activity this year has been sealed viaits regional offices outside of London, but LDC is keen to spot- and win - more opportunities from Lloyds' vast branch network,which currently serves up just a handful of deals each year.
Once a company is under LDC ownership, Lloyds can also pickup lucrative traditional banking business like providing loansat a time when British banks have been criticised for notlending enough to small and medium sized enterprises (SMEs).
LDC says it also using an office in Hong Kong, a departurefrom its UK base that raised eyebrows when it opened in 2008, tohelp UK companies expand into faster-growing Asian economies.
"If it was just about the returns, Lloyds could put themoney into other funds," Hurley said. "They like that we areinvesting in SMEs. There's good profile in doing that."
