One of Warren Buffet’s great aphorisms is “only when the tide goes out do you discover who’s been swimming naked.”
Pre ‘Big Bang’, when I first started working for a merchant bank (as they were called back in the day) if you wanted the price of a share, one would phone up a stockbroker, who would then call their desk – located on the edge of the trading floor – and a “blue button” would go and ask a stock jobber the bid/offer price for a particular number of shares in whatever stock you wanted to trade. This information was then relayed back via the same (laborious) process.
Today, assuming one has a phone signal, one can access a mass of market data in seconds. This would have been unimaginable pre-Big Bang.
Access to public markets has been transformed by technology, but private markets remain as opaque as ever. Of course, this means pricing is much fuzzier (i.e. exact comparable transaction data for pricing often does not exist, and there is a lack of transparency around typically complex deal structures) but, more importantly, if prices are changing significantly it is generally not apparent. If prices are falling then the market becomes prone to seizing up, as vendors chase prices that no longer exist. When prices are moving upwards, vendors typically miss out, as they have very limited data points – invariably fewer than the buyers – and are only too pleased when the value they had been looking for is achieved.
Pricing of quality financial services businesses has been on an upward trend for the past 12 months, though this was partially cloaked by the fact that many owners of private companies looked to exit before the March 2021 Budget, creating a temporary surge in supply. That supply has since decreased, resulting in the emergence of significantly higher prices, but many vendors lack this appreciation – or the tools necessary to extract the higher values that are currently available from the purchasers circling their businesses.
Purchasers will reluctantly acknowledge that vendors who are advised almost invariably achieve better terms. But when prices have been on an upward trend, this has never been truer. As an adviser in the “flow” our knowledge of both pricing and buyers allows our clients to benefit from the current incoming tide.
If you’re a business owner looking to explore exit options, or simply want to find out more about the market, please do not hesitate to contact us on the numbers below.
Insurance
After a very active October, in which more than twenty new UK insurance transactions were announced, November has been rather more muted, with fewer than half that figure.
In broking, Aston Lark demonstrated that its recent transaction with Howden is unlikely to be a barrier to further dealmaking, with two new acquisitions in the month, namely Innovation Broking, a commercial broker employing 30 staff in London and Watford, and Philip Williams & Company, a specialist broker based in Warrington that is best known as a group scheme provider to Police Federations and other law enforcement agencies.
Also among the broking consolidators, Global Risk Partners’ Dorset-based hub business Alan & Thomas Insurance Group announced the acquisition of Aquilla Insurance Brokers, a specialist broker in the real estate segment, and Clear Group acquired H R Jennings & Co, a long-established broker in South Croydon with specialisms including light aircraft and personal marine.
There were two transactions involving health insurance intermediaries during the month, with GRP healthcare hub Premier Choice Group announcing the acquisition of Equity Health Solutions in Bournemouth, and Chelmsford-based commercial broker Ascend Broking Group adding local provider SMP Healthcare, to help grow the group’s healthcare offering.
Finally, it was reported in the trade press that Xenia Broking Group, part of Nexus Underwriting, has acquired the trade credit and financial and specialty risk teams from Lloyd’s broker Parker Norfolk & Partners, and that MGA iprism Underwriting Agency had completed a management buyout, led by current Managing Director Ian Lloyd.
Investment
abrdn confirmed talks about Interactive Investor with JC Flowers & Co, the manager of the funds which own the retail investment platform. Indeed, the purchase of the platform for £1.5bn was subsequently announced on 2nd December.
In the asset management space, River & Mercantile Group (R&M) was keenly pursued by both Premier Miton Group, the London-listed asset manager, proposing a merger that would create a business with more than £18bn of assets under management, and AssetCo, chaired by Martin Gilbert, which also released a statement confirming it had submitted a “non-binding securities exchange proposal” for R&M.
Elsewhere in the asset management sector, Schroders acquired Cairn Real Estate, a real estate fund and asset management business, based in the Netherlands, with €1.3bn of AUM.
In the wealth management sector, Kingswood Holdings acquired Metnor Holdings and its Harrogate-based subsidiaries, IBOSS Asset Management and Novus Financial Services, adding over £1.4bn in AUM and AUA. Kingswood Holdings also bought Money Matters North East for up to £3.4m. MWA Financial acquired Essex-based CHC Wealth Management from chartered accountants Clemence Hoar Cummings, adding £380m in assets. MKC Wealth acquired the independent advice arm of Quilter-owned Lighthouse Group. Tilney Smith & Williamson strengthened its presence in the North East by acquiring Explore Wealth Management, which will be added to its Newcastle office. Independent Wealth Planners announced three acquisitions: Premier Wealth Management, which will bring £260m in AUA; Scotland-based Alex M Grant and Surrey-based Custodian Wealth Management, the latter two adding a combined £362m of AUA. Progeny acquired J M Glendinning Financial Services, expanding its footprint across Leeds and the broader Yorkshire area. Fairstone bought out Northern Ireland-based Fairstone NI, a firm that had joined Fairstone’s downstream buyout model in 2015, adding £150m in AUA. Perspective Financial acquired St Lawrence Investment & Pension Solutions, adding £55m in AUA. Beckett Investment Management bought Felixstowe firm Paul Schwer Financial Services.
It was also reported that Succession Wealth had been put up for sale by Inflexion, for around £400m, with a formal auction expected in early 2022.
Lending
Allica Bank made two significant announcements during the month: its first major acquisition with an agreement to acquire c.2,000 SME customers and c.£0.6 billion of associated lending from AIB Group (UK) following AIB’s exit from the SME market in Great Britain; and a £110m Series B funding round led by Atalaya Capital Management alongside existing lead investor Warwick Capital Partners.
Digital consumer lender Jaja Finance announced that a consortium of investors, led by existing shareholder KKR and including entities owned by investment funds managed by TDR Capital, had reached an agreement with Jaja to become majority shareholders of the business. Original investors, including IAG Silverstripe, will retain significant holdings.
Secure Trust Bank announced that it had agreed to acquire AppToPay to support its planned entry into the digital Buy Now Pay Later market. Arbuthnot Banking Group announced that it had disposed of its remaining shareholding of c. 2.14% in Secure Trust Bank, raising proceeds of c. £4.8m.
Elsewhere, Metro Bank confirmed that it had received and engaged in an approach from funds affiliated with The Carlyle Group regarding a possible offer for the bank. However, two weeks later Carlyle and Metro Bank announced that they had agreed to terminate such discussions.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
