Clients often come to us hoping to find “certainty” around a range of issues and questions: Who will buy my business? How much will they pay? What will the deal structure look like? How long will it take? Who do I tell internally about a sale and when? Will capital gains taxes rise?
The advice we give is based on 20 years of experience and relationships that are constantly being refined by other current discussions we are having in our chosen area of expertise, advising on the sales of financial services companies.
However, we don’t have a crystal ball and the future consistently confounds predictions. Clients also have very different attitudes to paying tax. This can range from a resigned acceptance of the two inevitabilities in life – death and taxes – to a steely determination that as little as humanly possible of 30 years of work should be shared with Jeremy Hunt.
But we can offer two insights. Firstly, the fear that capital gains tax rates were going to rise in March 2021 (they did not) saw a rush of vendors looking to exit before the budget. In their haste they typically did not take advice and sold for less than what would have been achievable with a more measured (advised) approach.
Secondly, vendors typically have quite unrealistic expectations around how long it takes to transact. This is understandable given that, in one-to-one discussions, acquirers will happily tell the vendors what they want to hear. If they don’t, somebody else will and they may lose out on the opportunity.
“It will be done in three months”. By the time the vendor realises this is a hopelessly unrealistic timeframe they are too far in to pull out.
So how long does it take? With not a bump in the road and a dollop of good luck one is generally still looking at 6 months as a minimum. Financial services is a regulated sector. Due diligence is a demanding process. And most transactions cannot be completed without FCA approval. Due diligence also has a nasty habit of bringing up unforeseen issues that whilst solvable, take time to resolve. If you want to be cautious, we advise clients to plan for a process to take 12 months from start to finish. If one wants to be as certain as one can be of hitting a deadline, 15 months should allow for bumps and mishaps on the journey.
If you want to understand the issues around sale, we are always delighted to advise on any aspect of a transaction – other than what a future Chancellor might do.
Insurance
April was another busy month for UK Insurance sector M&A, with 16 new deals to report on and no fewer than eight of the active consolidators announcing one or more new acquisitions across the broking and MGA segments.
As always, the majority of activity was in commercial lines broking. PIB Group, which has recently been more active in overseas M&A than domestically, announced two new deals in the month, adding Bristol-based PI broker Pure Risks and property specialist St Giles, including St Luke Underwriting. Global Risk Partners announced a deal for Thompson & Co. (Risk Solutions) in the West Midlands. Partners& added Richard Thompson Insurance Brokers in Weybridge. Greenwood Moreland, the acquisitive Scottish broker owned by J.M. Glendinning added Gordon Blyth Insurance Brokers in Paisley. The Needham Group announced that it had acquired P J Insurance Brokers, adding £2.5m of GWP, and FR Ball announced that it had acquired Export & General Insurance Services in London.
Also in commercial lines, two of the more recent US buyers in the UK market announced new deals. NFP added Gravity Risk Services, a community broker in the West Midlands, and AssuredPartners, via PSP Group, consolidated its leading position in the South West of the country with two new acquisitions, Sterling Select Insurance Services and Castle Sundborn.
In personal lines, Ardonagh announced deals for HNWI specialist Stanhope Cooper, as well as associated MGA Renovation Underwriting, which provides insurance for private client contract works and high-value projects. Insurer Direct Line announced that it had agreed to acquire By Miles Group, a technology-led MGA providing of pay-by-mile motor insurance, adding c.£26m of GWP. In the largest sector M&A deal of 2023 to date, pet insurance business Animal Friends was acquired by Pinnacle Pet Group, a pan-European pet insurance provider backed by JAB Holding. Commercial Insurance Services (which trades as CiSL) also announced that it had acquired the insurance broking division of Grayside Financial Services (which is part of Fairstone) in Surrey.
Finally, Specialist Risk Group continued its recent run of new deals with the announcement that it has agreed to acquire The Medical Professional Liability Company (MPLC), an MGA and Lloyd’s coverholder that provides medical professional liability insurance and reinsurance.
Investment
April was a busy month for M&A activity in the investment sector, highlighted by three high profile transactions. First came the announcement of Rathbones’s £839m acquisition of Investec Wealth & Investment, creating a leading wealth management group with over £100bn of client assets. Then came Deutsche Bank’s £410m public offer for UK broker and investment bank Numis, which advises almost a fifth of companies in the FTSE 350 index. In the meantime, it was reported that fund manager Liontrust was pursuing the Swiss fund group GAM. A £96m deal was indeed agreed earlier this week to form an international asset manager overseeing £53bn.
Several other deals were announced in the wealth management sector. Irwin Mitchell Asset Management increased its AUM to £1.2bn with the acquisition of Leeds-based wealth manager Andrew Gwynne. Gilson Gray Financial Management acquired Fife-based SJP partner firm, RS Robertson Financial Planning, taking its AUM to over £650m. Adviser Services Holdings Limited launched its advice business, Lync Wealth Management, with the acquisitions of Sheffield-based Sheafmoor Money Management and Belfast-based North Financial Management. Liverpool-based CAM Wealth Group was formed with the buyout of London-based Charteris Asset Management by Derek Gawne and Lizz Ewart. Holborn Financial announced the acquisitions of Whitchurch-based Kingsley Financial Management and Maidstone-based Gary Cook Financial Services. Clifton Asset Management increased its AUM to £1.2bn by adding 550 clients with the acquisition of Wombourne-based GB Financial Services. Mattioli Woods acquired Doherty Pension & Investment Consultancy in Northern Ireland for £15m and Apollo Private Wealth increased its AUM to £300m with the acquisition of fellow SJP firm Debra Wait Wealth Management. Antrams Financial Services and Pembroke Financial Services announced their merger, creating a combined firm with £1.5bn of client assets.
There was also activity elsewhere in the sector with Momentum Global Investment Management’s acquisition of the £2.3bn fixed income and multi-asset investment specialist, Crown Agents Investment Management, and Royal London’s acquisition of Aegon’s individual protection book. It was rumoured that buyout firm Inflexion was planning a £400m bid for Caledonia-backed investment and wealth manager 7IM. Mattioli Woods completed a second acquisition in April, with a majority 50.1% stake in Lincoln-based mortgage broker, White Mortgages. London-based digital mortgage platform, Tembo, raised £5m from a consortium consisting of its existing investors, Aviva Ventures and Ascension Ventures, as well as Lone Ventures and Starling Bank backer, the McPike family office. Bagnor-based insurance and protection business, Precise Protect, was acquired for £7m by London-listed investment group Tavistock Investments. Evelyn Partners completed its second professional services acquisition of the year with the addition of Cambridge-based accountancy and tax specialist, Ashcroft Partnership.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
