What’s driving M&A activity in UK asset and wealth management?
April 12, 2016
The first quarter of 2016 continues the trend of unprecedented levels of merger and acquisition (M&A) activity seen across the UK Asset and Wealth Management (AWM) sector* during 2015. This has been fuelled by an increasing number of corporates and private equity (PE) firms seeking either to grow their existing franchises or establish a foothold in the UK as one of the key global wealth markets. We are finding that the market’s attractiveness to investors is borne out of a combination of key drivers:
- Fragmentation: The AWM sector remains deeply fragmented which creates opportunities for building scale. For example, in the advice market alone, our analysis shows that PE backed firms acquired over 30 independent financial adviser (IFA) businesses in 2015. Fragmentation has also driven the emergence of vertically integrated models as businesses seek to enhance their proposition through taking a greater share of the value chain.
- Regulation: Continued evolution of the regulatory environment is positively impacting the sector, driving new clients and asset flows as a result of change such as pensions freedom, financial advice market review (FAMR), reduction in annual and lifetime allowances and the forthcoming opening of the secondary annuity market.
- Technology: The increased adoption of technology is becoming ever more important in generating efficiencies and future proofing business models. There’s been interest in building complementary propositions such as robo-advice and D2C (direct to consumer) capabilities in particular.
These positive M&A dynamics meant that 2015 was another buoyant year for M&A in the AWM sector. Our analysis shows that there were around 100 reported deals and an average price ticking up to 2% of assets under management (AUM). The first quarter of 2016 has seen no let-up in this rate of M&A activity, with notable transactions across the sub-sectors as follows:
Asset management & discretionary fund management
- LGT announced the acquisition of a majority stake in discretionary fund manager Vestra Wealth with over £5.6bn AUM.
- Tilney Bestinvest announced the acquisition of Ingenious Asset Management with £1.8bn of discretionary AUM.
- Société Générale announced the acquisition of Kleinwort Benson to combine with its private bank Hambros to create a wealth manager with £14.2bn in assets under management.
- Momentum announced the acquisition of DFM business Adviser Solutions from London & Capital with £200m in assets.
Financial planning / advice
- Standard Life continued its build of national advice arm, 1825, announcing the acquisitions of Almary Green and Munro Partnership and increasing assets to £2.6bn.
- Fairstone announced the acquisition of Avidus Scott Lang, an advice firm with £350m in assets as it continues to build scale in its national advice business.
- Mattioli Woods announced the acquisition Maclean Marshall Healthcare as part of the firm’s strategy to grow their employee benefits business.
- eVestor, an online investment advice business, has acquired Postcard Planning in a bid to build out its advice proposition, highlighting the trend of combining advice and technology.
- AJ Bell made a triple acquisition to launch its own asset management business and diversify business model to rival competitors.
- Curtis Bank announced the acquisition SIPP provider Suffolk Life from L&G and will increase assets under administration by £8.7bn.
- FTV acquired a significant minority stake in True Potential, which has over £3bn of assets on platform.
- Transact, with £20bn of assets on platform, announced plans to float 25% of its shareholding on AIM.
Even against a backdrop of volatile stock markets and potential impending political change in both the UK and US, the forecast for 2016 M&A in the AWM sector remains cautiously optimistic. We are currently seeing a strong underlying pipeline for transactions at all stages of the deal cycle primarily due to the market drivers discussed above. We’ve already seen activity in Q2 2016 picking up momentum with Tilney Bestinvest proposed acquisition of Towry and Standard Life’s announced purchase of Baigrie Davies.
What factors have influenced your deal making recently? And how do you see the rest of 2016 playing out? Share your thoughts below or schedule a meeting to discuss your situation in confidence.
* The AWM sector includes asset management, wealth management / discretionary fund management, financial planning / advice and platforms