I can confidently predict by the time you read our next monthly M&A review I will be certain what the changes to the capital tax regime will be. And because you will have read the same papers as me, so will you. Discretion being the better part of valour, so I am keeping shtum on the subject.
What I am confident of is there will be a mini peak of transactions as the threat of higher capital gains tax rates has caused some owners to accelerate their plans to exit. But it will not be a wall of deals that are being reported in other sectors.
A sale of an FCA regulated business needs FCA approval which can take up to three months to be obtained. But this is just the external manifestation of the impact on timing of deals in a regulated environment. Due diligence of regulated companies is often more rigorous as buyers look to ensure any regulatory issues are identified and the potential risks can be mitigated and/or the costs of rectification quantified.
It is not uncommon for us to have data rooms with thousands of documents in them. Due diligence is an exhaustive, and in most cases, exhausting process that can take months to complete, restricting the ability of owners to execute quick exits.
While a few owners may have triggered the process earlier and are now hoping to complete before the end of the tax year, others have opted to take the risk of a higher tax rate rather than accelerate what is a complex process that requires careful preparation. There is an adage that tax is a tail that should not wag the dog. This might be what we are currently observing.
Insurance
2021 got off to a busy start for Insurance M&A with 13 announced transactions, including a number of high-profile transactions on the distribution side of the market, with two of the major broking consolidators announcing a change of ownership.
Early in the month, Inflexion-backed Bollington Wilson Group announced that it had been acquired by Arthur J. Gallagher in a transaction valued at more than £200m. Less than a fortnight later it was the turn of PIB Group, which announced that it had undertaken a secondary PE deal, with funds managed by Apax Partners acquiring the business from Carlyle (who will remain invested as a minority shareholder) in a deal valuing PIB at more than £1bn.
In another high-profile deal in the month, leading motor insurer Markerstudy announced that it had taken a £200m investment in a deal led by Pollen Street Capital. Markerstudy completed its acquisition of the Co-op’s underwriting business at the end of 2020.
The month also saw a continuing flow of smaller commercial broking deals, with activity largely driven by the broking consolidators. Global Risk Partners acquired Birmingham-based commercial broker Newstead Group and, via its healthcare hub Premier Choice Healthcare (PCH), a book of healthcare business from SJA International. PIB Group acquired construction specialist UK & Ireland Insurance Services. Finch (part of Ethos) acquired Compass network member Headley Group, while Finch’s ultimate parent Ardonagh separately acquired PI specialist and Lloyd’s broker Hera Indemnity. Finally, US firm AssuredPartners announced that it had acquired Scottish broker Borland Insurance, and Heath, Crawford & Foster acquired both ABA Insurance Services and Bradshaw Bennett.
There was also continuing M&A activity among MGAs. Specialist Risk Group announced that it had acquired building & construction specialist GB Underwriting, and Newcastle-based Generation Underwriting Management was acquired by Arden UW, part of Willis & Company (the privately owned business based in Northern Ireland, not to be confused with the other Willis ..).
Lastly, loss adjuster Woodgate & Clark announced that it had acquired Manchester-based Quadra Claims Services.
Investment
National advice firm AFH Financial agreed terms for a £225m takeover offer from a US private equity firm Flexpoint Ford, showing the continuing interest of the private equity community in the wealth management space. Similarly, Hawksmoor, the discretionary fund manager, agreed to be acquired by Hurst Point Group, a holding company, backed by another US private equity fund The Carlyle Group. Last year Hurst Point Group went on to buy five financial planning firms through its subsidiary Harwood Wealth Management.
In the asset management sector, Foresight Group, the specialist infrastructure and private equity investment manager, announced plans for a flotation of its shares on the London Stock Exchange’s main market. Natixis Investment Management agreed to sell its majority stake in H2O Asset Management back to the investment firm’s management team and Toscafund Asset Management took a 29.8% stake in AssetCo in consortium with other investors, including the former Vice Chairman of Standard Life Aberdeen, Martin Gilbert. AssetCo will look to pursue strategic investment opportunities in the financial services sector and has already taken a 2.9% stake in River & Mercantile.
Intermediate Capital Group, the private debt and equity provider, agreed to acquire Broadstone, the pensions, trustee and employee benefits group, from Livingbridge, another private equity fund. Dentons Pension Management acquired Brown Shipley’s pension administration business and professional trustee company and Mattioli Woods bought the Exempt Property Unit Trust administration business of BDO Northern Ireland to complement its SSAS and SIPP proposition.
In the IFA space, Beech Tree Private Equity invested in London and Glasgow-based Advanta Solutions, with c. £500m of client assets, and committed between £10m to £40m to fund Advanta Solutions’ acquisition strategy. Perspective Financial Group acquired Atkinson White Partnership and Independent Life & Pensions Group, gaining over 900 clients and £250m of additional client assets from the transactions. Thorntons Investments bought Aberdeen-based Matheson Financial Consulting and Dundee-based Sonas Wealth Management, adding £175m of client assets. Fairstone announced the purchase of Hammett and Petch Financial Planning which has some £60m of client assets. Connectus Wealth Advisers, a partner firm of US wealth adviser Focus Financial Partners, acquired Cheshire-based Watterson Financial Planning, and Vintage Wealth Management agreed to acquire Corfe Wealth Management as part of its ongoing growth strategy. North Wales-based Celtic Financial Planning acquired the financial advisory arm of Halton Insurance Services and Abacus Money Management purchased Somerset-based Westcliff Financial Management.
Elsewhere in the sector, James Hay is rumoured to be in the prime position to acquire Nucleus, the wrap platform provider. Mattioli Woods made a strategic minority investment in the wealth management software business Tiller Technologies and Transact’s parent company IntegraFin Holdings purchased the financial planning software provider Time4Advice.
Lending
In a quiet start to the year, the banking sector provided the most notable transactions. Oxbury Bank, the specialist agricultural lender, launched having secured an additional £15m funding from its Series C round that was led by Wheatsheaf Group alongside existing investors Frontier Agriculture and Hutchinson Group. Shawbrook Bank announced that it had agreed terms to acquire specialist intermediary business, The Mortgage Lender, to strengthen its position in its core residential and buy-to-let markets.
Elsewhere, specialist lender Pivot announced that it had secured a £15m investment from Quilam Capital: the new funding lines will support growth in its unregulated bridging and development finance offering. Ascent Performance Group, part of the Irwin Mitchell Group, announced that it had acquired Excel Collection and Enquiry Services.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
