On the day before the Budget, IMAS advised on two completed transactions timed to avoid the risk of an increase impacting the deals, albeit we felt it unlikely. But, we could not give any firm advice as we had no crystal ball and, had we been wrong, the cost to our clients would have been very real.
Driven by the concerns about a possible increase in tax rates, many business owners decided that speed of transaction was paramount. Instead of appointing an adviser to find them the best transaction and maximise value, they rushed to enter into one-to-one discussions with a buyer, against the background of a ticking clock. This is a clear example of the tax tail wagging the dog.
Advice is much more than just running an auction. It is about ensuring the best terms across a wide range of issues, including how to find the best cultural fit for their business. Insights into cultural issues come from really knowing and understanding all of the buyers. Other important insights come from having done many deals in a sector. A buyer’s lawyer recently complained to us we were using knowledge gained in another deal to the advantage of our client. That is of course exactly why our client had engaged us.
Advice is also about minimising the distraction for the business and its management that can impact current and post completion trading. This ranges from only engaging with buyers that have the necessary cash/willingness to pay a full price, to addressing the myriad of deal details and project management issues required to support the due diligence process.
If you work with an adviser that really understands your sector they should be able to provide valuable guidance long before you engage in any discussion with a buyer or buyers. This is why we encourage potential sellers to meet with us in advance of a process.
Insurance
There had been a great deal of commentary about the March 3rd Budget precipitating a rush to the exit by private sellers concerned about a hike in the CGT rate. Well, in the event the Chancellor decided not to raise CGT (yet), but judging by the deluge of announced deals over the past month, many private sellers chose not to take on that risk and agreed transactions in advance of budget day. New deals are still being announced on a daily basis and so the cut off date for those below was 5th March.
The busiest of the buyers was Aston Lark, announcing the acquisition of construction-specialists Sennocke International and Build-Zone Survey Services, Scottish commercial broker Bruce Stevenson Insurance, MGA Inet3 (better known as Magenta Insurance), and Bristol-based commercial broker Venture Insurance. The group also extended its presence in the health insurance market with the acquisition of Right to Health and The Health Insurance Specialists. Together these acquisitions will add more than 250 staff to the group, a significant jump up in headcount.
Global Risk Partners was also busy, announcing that it had acquired Suffolk-based construction specialist Five Insurance Brokers, and via Birmingham hub Newstead, commercial broker Alford Burton & Co. More significant however was GRP’s announcement that it had also agreed to acquire Marsh’s UK Networks business, comprising Marsh ProBroker, Bluefin Network and Purple Partnership.
Four other consolidators announced more than one deal during the month. Livingbridge-backed Jensten Group acquired both Sydney Packett & Sons and Advance Insurance Agencies. Ardonagh announced that it had acquired both specialist PI broker Hera Indemnity and M&A insurance broker Hemsley Wynne Furlonge Partners. Specialist Risk Group agreed to acquire trade credit specialist The Channel Partnership and property MGA CLS Risk Solutions. Finally, Synova-backed J.M. Glendinning announced it had acquired both Butterworth Spengler Insurance Brokers in Liverpool and High Net Worth specialist Nowell & Richards Insurance Services in Staffordshire.
Lastly among the consolidator-led acquisitions, PIB Group announced that it had acquired Element Hinton Insurance Brokers in Staffordshire.
Competition for a diminishing number of brokers is only set to become more intense and there was news this month of another PE-backed firm joining the ranks of the consolidators above. Inflexion announced that it had backed an MBO of commercial broker DR&P Group and will no doubt be hoping to emulate the recent success it had with now-realised investment in Bollington Wilson.
In other insurance distribution transactions, Markerstudy announced that it had agreed to acquire Brightside Group, the Anacap-backed business it had previously sought to acquire in 2013, US business Applied Underwriters acquired MGA Concept Special Risks, MGA Avid Insurance acquired construction specialist Incorporated Insurance Group (IIGL), and JC Flowers-backed OneGlobal announced that it had sold Lloyd’s Broker SSL Insurance Brokers back to former owner Andrew Sturdy, via his newly formed company Sturdy AGI Holdings.
Lastly, insurer AXA XL confirmed that it had agreed to sell its UK private client business to Aviva, which has been busy divesting a number of its overseas operations as it seeks to focus on a smaller number of core markets.
Investment
The investment platform James Hay acquired the rival adviser platform Nucleus Financial for £145m. Following the acquisition, James Hay intends to merge the firms’ operations to create a financial planning and retirement-focused platform with client assets of £45bn.
In the asset management sector, Foresight Group, the specialist infrastructure and private equity investment manager, floated on the London Stock Exchange with a market capitalisation of around £455m. Alternative credit asset management firm Cairn Capital, supported by its majority shareholder Mediobanca, agreed to acquire and merge with Bybrook Capital, a specialist distressed credit manager based in London. AssetCo announced plans to transform itself into an asset and wealth management business and took a further 2.9% stake in River & Mercantile lifting its interest to 5.9%. Polar Capital completed its previously announced acquisition of Dalton Strategic Partnership, a boutique asset manager with over £1.2bn of assets under management, for £15.6m.
The wealth management sector saw continuing interest from private equity funds on a large scale. Fairstone secured a significant investment from the global private equity house TA Associates with its current backer Synova also retaining a stake in the business. Another international investment firm, HPS Investment Partners, agreed to make a £125m investment into Canaccord Genuity’s UK wealth management group. It acquired convertible preference shares, which, if converted to ordinary shares, would give it a 22% stake. US private equity firm Flexpoint Ford increased its bid for national advice firm AFH Financial from £225m to £232m after its previous offer, which had been recommended by the independent directors, had failed to win approval by the shareholders. Elsewhere in the sector, the wealth management boutique Oberon Investments Group (formerly Baskerville Capital) with £400m of client assets floated on the growth market segment of the Aquis Stock Exchange.
In the IFA sector, Independent Wealth Planners acquired Edinburgh-based Sutherland Independent with £270m of client assets. Mattioli Woods added 150 clients with £80m of assets with the acquisition of a financial planning firm Montagu for £2.3m and Wren Sterling completed the acquisition of West Yorkshire-based White Wells Investments, adding £50m of client assets. The Swindon-based Unique Financial Planning launched a wealth division after it had merged with part of financial adviser Bright Blue Wealth at the end of last year.
Elsewhere, the US tech-focused private equity investor Siris tabled a takeover offer for the financial administration outsourcing business Equiniti, valuing the group at nearly £600m. To simplify partnership arrangements between the two groups, Phoenix Group bought the “Standard Life” brand from Standard Life Aberdeen which, in return, acquired the self-invested personal pension, onshore bond and the trustee investment plan businesses from Phoenix Group and begun a review of all of its business brands. Also in the pensions arena, Dentons Pension Management acquired MAB Pensions, a small self-administered scheme administration business, for an undisclosed sum.
Lending
There was considerable M&A activity in the banking market relating to loan portfolios: Metro Bank acquired a portfolio of predominantly unsecured consumer loans from peer-to-peer investors who had invested through the Retail Money Market (“RateSetter”) platform for a cash consideration of up to £384m; OSB Group announced that it had completed the purchase of a c. £55 million portfolio of UK residential mortgages from Arbuthnot Banking Group; Tandem Bank acquired the £100m mortgage loan book of private lender Bank and Clients; and NatWest Group completed the acquisition of a c. £3bn residential mortgage portfolio from Metro Bank. In addition, UK Asset Resolution confirmed that it had agreed to sell the issued share capital of Bradford & Bingley and NRAM and their remaining mortgage and loan portfolios to a consortium comprising Davidson Kempner Capital Management and Citibank.
Elsewhere, TDR Capital announced that it had made an approach to the Board of Arrow Global regarding a possible all-cash offer at 305 pence per share, valuing the company at c. £541m. The Board responded that it was considering the proposal. NatWest Group announced the completion of its strategic review of Ulster Bank, resulting in a phased withdrawal from the Republic of Ireland. Distribution Finance Capital Holdings announced that it had conditionally placed c. 72.7m new shares, representing c. 40.5% of the enlarged group, to raise gross proceeds of c. £40m in support of its growth strategy.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
