A new joint venture between former US vice-president Al Gore’s Generation Investment Management and Canadian asset manager La Caisse de dépôt et placement du Québec (CDPQ) has bought platform technology giant FNZ, in a deal valuing the firm at £1.65bn ($2.16bn, €1.88bn).
FNZ is the number-one technology platform in the UK by market share, powering adviser platforms including Aviva, Standard Life Aberdeen, Quilter and Zurich.
The New Zealand company expanded into the UK in 2005, initially partnering with Standard Life Aberdeen and basing its UK operations in Edinburgh.
It also numbers Barclays, Generali, HSBC, Lloyds Bank, Mercer, Santander and UBS among its clients.
"We are creating a new model of sustainable equity investing"
It is thought that FNZ’s previous backers, private equity firms General Atlantic and HIG Capital, have wanted to sell FNZ for some time. The acquisition is the first investment from the sustainable investment partnership CDPQ-Generation.
Attractive to buyers
The Lang Cat’s consulting director Michael Barrett said: “If you look at the FNZ client list, you can see the size and the calibre of the clients who are using FNZ technology. Clearly a firm of the size of, for example, Santander is going to go through a very robust due diligence to get to that point.”
He added that FNZ are also likely to retain clients for a long period of time, which made the company attractive to buyers.
Barrett said: “You have got to have a very clear reason to want to move away from them. They will retain clients of that calibre. The question is where they go next to attract the next set of high-level impressive names.”
He said this sort of corporate activity is something advisers should be aware of, but that most intermediaries know that where there are problems with platform tech they need to talk to the provider, while the Financial Conduct Authority is clear that is where the buck stops.
Discussing the deal, David Blood, senior partner and co-founder at Generation, said: “FNZ represents an outstanding first investment for our new partnership. It is an exceptional company with a management team that has demonstrated its ability to innovate and grow in the fast-moving fintech sector.
“We believe our long-term approach will suit the company and allow it to continue to invest in its technology and service proposition to the benefit of savers and pensioners, as well its employees, customers and investors.”
Stephane Etroy, executive vice-president and head of private equity at CDPQ, said: “Through our newly announced partnership with Generation, we are creating a new model of sustainable equity investing, which reflects the ethos of both companies and is ideally suited to the objectives of long-term sustainable value creation.”
Digitised value chain
Adrian Durham, chief executive and founder of FNZ, said: “We started FNZ by asking, ‘How can technology solve the problems faced by consumers of long-term savings products?’ We saw investors being charged so much that their retirement income was halved by charges alone. They were no better off than a bank deposit, despite taking risk and investing in managed funds for over 30 years. Choice was non-existent and the entire value chain was managed using paper.
“Our approach has entirely digitised the value chain, reducing cost and complexity for financial institutions and consumers alike. Our clients have all moved to platform as a service (PaaS), combining cloud-based software with transaction and custody services. This frees them to focus purely on their customer proposition, transferring all the technology, transaction and asset servicing to FNZ.
FNZ is responsible for over £330bn in assets under administration and has more than 60 financial institutions clients across the UK, Europe, Australia, New Zealand and south-east Asia.
The fintech firm was founded in New Zealand in 2003 by Adrian Durham and FNZC, New Zealand’s leading investment bank and wealth manager. The company partnered with HIG to fund a management buyout in 2009 and General Atlantic provided additional investment in 2012.
The company has more than 1,400 employees in the UK, Czech Republic, Shanghai, Singapore, Australia and New Zealand. Around 400 staff are shareholders, who will continue to own about one-third of the equity of the company following this transaction.