Covid continues to impact all our lives and often in ways we did not expect (Boris will have his own views on this). Aside from the Lending sector, in which transaction volumes continued to decline partly as a result of a drop in the number of transactions in the Payments sector, M&A activity remained buoyant across the financial services last year.
The most striking feature of the chart above is the big jump in M&A activity in Q1 2021, as private owners of (mainly) insurance brokers looked to pre-empt a much-touted – but ultimately never enacted – increase in the rate of Capital Gains Tax. The Investment sector, possibly better tuned into issues around tax, took – correctly as it turned out – a much more sanguine view.
One cannot read the business pages without seeing a reference to some private equity firm tabling another multi million (or billion) pound deal for a UK business. Collectively, as buyers they have enormous influence, either by purchasing businesses directly, or indirectly, by providing new capital to firms that are themselves consolidating smaller units in particular sectors.
Despite significant fluctuations in the levels of overall Financial Services M&A activity their market share has remained almost entirely unchanged over the past three years, with an involvement as buyers in just over 50% of all transactions (by volume).
Further analysis is given at the bottom of this email but it remains very much a first look. In the next couple of months we will be producing more detailed reports on 2021 M&A in Insurance Distribution and the Investment sectors. Suffice is to say increased valuations helped stimulate deal activity and we will be looking at recent valuation trends in greater detail in our reports.
That said, if you would like to gain a greater understanding of current sector valuations and how these relate to your own company, please do not hesitate to contact me or one of my colleagues.
Insurance
The final month of 2021 proved relatively quiet in terms of UK Insurance M&A but marked the end of a busy quarter for sector M&A volumes, in a year in which just under 40% of all announced M&A (by volume) happened in the first quarter.
There were two notable transactions in the commercial motor segment, with insurtech Humn.AI acquiring fleet insurance MGA Walsingham Motor Insurance, and Pollen Street-backed Markerstudy acquiring Clegg Gifford, the long-established Lloyd’s broker best known for its motor trade expertise and taxi insurance, where it operates as Westminster Insurance.
Markerstudy did not stop there however, also announcing the biggest transaction of the month with its acquisition of BGL Insurance, the insurance arm of Comparethemarket owner BGL Group, in a deal worth a reported £400m.
Elsewhere in broking M&A, Howden announced that it had acquired Ross Insurance Group, credit insurance and surety specialist Xenia Broking (part of Nexus Underwriting) acquired Peter Hill Credit & Financial Risks in Northampton, Global Risk Partner hub business Alan & Thomas acquired BIG Insurance in Bournemouth, and Northern Irish broker Dickson & Co. announced the acquisition of Morrison Associates. Howden-owned Aston Lark also continued its steady stream of acquisitions – ending 2021 with more than 20 new UK deals – with the acquisitions of both Mainstay Insurance in East Sussex and the client book of Choice Benefits, a Private Medical Insurance specialist in Lancashire.
Finally, the Preservation Capital-backed consolidator Optio Group announced that it had acquired the W&I specialist MGA Brockwell Capital.
Investment
abrdn agreed to buy Interactive Investor, in a deal worth £1.49bn. The platform will operate as a standalone business within abrdn’s “personal vector” division. Nasdaq-listed Morningstar acquired Australian-listed Praemium’s operations in the UK, Jersey, Hong Kong, and Dubai for a cash consideration of £35m.
In the asset management sector, FTSE 250-listed Liontrust Asset Management agreed to acquire Majedie Asset Management for an initial £80m, plus an additional deferred consideration of up to £40m. The deal, due to complete next April, will increase Liontrust’s AUM by £5.8bn to more than £42.3bn, and boost its position in the institutional market. Schroders acquired a 75% shareholding in London-based renewable infrastructure manager Greencoat Capital, adding £6.7bn in AUM, for an initial consideration of £358m. Premier Miton and AssetCo were granted extensions until 18 January to make their formal bids for River and Mercantile which runs £4.4bn in assets. It was also reported that the private equity group, CVC Capital Partners, is mulling a stock market listing, that could value the business up to £11bn.
In the wealth management space, Canaccord Genuity Group agreed to acquire Punter Southall Group’s wealth business for a cash consideration of £164m. The deal includes the intermediary-facing brand Psigma. Digital wealth manager Moneyfarm bought Wealthsimple’s UK business book, adding £272m in AUM to its existing £2bn. IFA consolidator Independent Wealth Planners has bought Throgmorton Wealth Management adding £135m of AUA. National advice firm Succession Wealth acquired Bankhouse Financial Management (£211m AUA) and JCF Financial Services (£151m AUA), bringing its total AUA to £8.4bn.
Elsewhere in the sector, XPS Pensions Group acquired the business of Michael J Field Consulting Actuaries to further develop its self-invested personal pension (SIPP) business. Michael J Field is a self-invested personal pension (SIPP) and small self-administered scheme (SSAS) provider based in Manchester.
In the fintech sector, FNZ officially offloaded its GBST and agreed to reacquire the latter’s capital markets division from global private equity fund Anchorage Capital Partners and London-based Akoni Hub was acquired by insurtech group Stubben Edge. The deal will see Akoni’s cash management service added to Stubben Edge’s insurance and financial services products.
Lending
In a quiet end to the year, Amigo Holdings provided an update on its redress proposals, subject to Court and creditor approval, based on two alternative schemes of arrangement: a preferred ‘New Business Scheme’ contingent on new lending restarting and a successful equity raise of at least £70m, or a ‘Wind-Down Scheme’.
Monzo was reported to have closed a funding round of $475m from new investors including Abu Dhabi Growth Fund. Bumper, the buy now, pay later provider, raised $12m in a Series A funding round from investors led by Autotech Ventures, Jaguar Land Rover’s fund InMotion Ventures and Porsche Ventures.
There were also maiden acquisitions by Monese and OakNorth. Monese announced the acquisition of Trezeo, broadening its credit and lending proposition for the self-employed. OakNorth announced it had agreed to acquire Fluidly, a cashflow forecasting service for SMEs.
Elsewhere, NatWest Group announced that it had signed a legally binding agreement with Permanent TSB for the sale of c. €7.6bn of gross performing loans (comprising non-tracker mortgages, micro-SME loans and Ulster Bank Ireland’s asset finance business) as at 30 June 2021 and 25 branch locations.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
