In the past few years there has been a surge in M&A activity within the financial advisory and wealth space in the UK and across the globe.
Many firms have become full-on consolidators, entering into dozens of acquisitions a year – such as IWP – or rolling out programmes to help smaller advice businesses set up a succession plan for when they retire, like Fairstone does.
There has also been an increasing flow of private equity money coming into the sector, with a big players being snatched up – one example being Flexpoint Ford acquiring AFH Financial Group for £231.6m ($316.2m, €268.4m).
The latest newcomers seem to be special purpose acquisition companies (Spacs), which are very common in the US but have just started gaining ground in the UK market.
Examples include UK wealth manager True Potential looking into a $2bn (£1.5bn, €1.7bn) Spac float on Wall Street; or Kingswood’s US Spac, Kingswood Acquisition Corp, looking to merge with wealth solutions provider Lombard International.
But in the last couple of years there have been two M&A deals that have caught the attention of financial regulators around the world.
One is the merger of platforms FNZ and GBST and the fusion of global brokerages Aon and Willis Towers Watson.
Case studies
Both deals were under close scrutiny from the moment they were announced, with watchdogs from east to west concerned about a reduction in competition within their respective markets.
The firms involved in both deals were asked to prove that they wouldn’t pose a risk to services and prices offered to consumers, and were told to put remedies in place – which included selling some parts of the businesses – to mitigate such concerns.
FNZ was given the option to sell GBST with the opportunity to repurchase certain parts of the firm related to the capital markets arm.
This was not the same for Aon and Willis Towers Watson, which had battled the concerns of Australian, EU and American regulators.
But legal proceedings brought by the US Department of Justice were the final nail in the coffin and the deal was abandoned, triggering an expensive exit clause for Aon.
Too much or just enough?
Such a high level of scrutiny for nearly two years on all four of the firms shows that fairness and competition are quite high on regulators’ priority lists.
But are they taking it a step too far?
Richard Bacon, head of sales and business development at Shard Capital, doesn’t believe so. He told International Adviser that most M&A deals recently have been more focused on making shareholders happy than on doing right by the clients.
When asked whether watchdogs are being overly cautious, he said: “It’s hard to apply one rule here as each case has its own nuances, however, generally speaking I think the answer is ‘no’.
“Their actions are justified, and I’m pleased to see it. Personally, whilst it is a fact of life, I think regulatory change and cheap money has created a wave of M&A in our sector. Rarely to the benefit of the end consumer and frequently to the benefit of shareholders.
“I don’t want to jump on the populist band wagon, but I’m fully supportive of the regulator stepping in, particularly at the top end.
“Competition is essential, but when M&A does take place, it needs to happen with a focus on client service and outcomes, not simply the delivery of a more mundane product at an ever-cheaper price due the improved scales of economy.”
