M&A – identifying opportunities and valuing them

Wealth Management and Private Banking

13 June 2019

Wealth Management and Private BankingWealth Management and Private BankingYour business


  • During the transition period, status quo is maintained.
  • Brexit deal is not seen favourably for either side of the political debate in Britain. There are long-term political implications of the deal and Brexit.
  • Economic effect of Brexit has already been negative and that is before the UK has even left. There is still uncertainty that affects the stalling market.

 Key challenges

  • Wealth management companies find it difficult to grow organically. Measurement of their EBITDA (pre-synergy) suggest that M&A opportunities are present and may provide a different route to achieve the required growth.
  • It is often difficult to evaluate what constitutes a ‘right fit’ and how this should be measured, e.g. is there useful MI that can be used?
  • Technology and structural reforms are enormous, due to both the competitive landscape and the disruptive impacts of regulation.
  • Regulatory history and culture need to be addressed from the outset. The process of assessment is getting longer, which is having an impact on valuations.
  • Shifting assets between different platforms can involve complexity, therefore WM firms should consider single-platform in their integration plans.
  • Problems related to human dynamics (e.g. power struggles within a WM firm) can derail financial opportunity.
  • International mergers create an additional layer of complexity.


  • Drivers for M&A business include: 
  • MIFID II and regulatory concerns.
  • Weak integration of a firm’s platforms, systems, and technology, and a desire for centralised platforms.
  • Synergy of key metrics e.g. EBITDA, assets on balance sheet, income streams / cashflows. 
  • Points to address when considering M&A: 
  • People and cultural fit
  • Buy-in, alignment of proposition and strategic fit
  • Regulatory background
  • Technology and integration
  • The UK wealth market is growing and attractive to investors. Historically we have enjoyed 10% compound annual growth of wealth assets, and expect it to grow by 15% next year. 
  • Key drivers for this growth have been: 
  • Strong capital market performance
  • Inflows to the UK from offshore locations
  • Pensions freedoms
  • The intergenerational wealth transfer 
  • However the costs and disruptive implications of regulation, technology and structural reform are enormous and smaller players are moving towards the exit door.
  • In the last year, there have been circa 80 significant transactions.
  • The (M&A) market is very active
  • The classic way to value Wealth Management is to look at listed firms
  • There has been a reduction in valuations of IFA’s over time, whereas valuations in WM businesses is more stable.
  • WM find it difficult to grow organically. Pre-synergy EBITDA – opportunities are there.
  • Reasons for exit are due to Regulations (MIFID II) and Compliance.
  • There will be a lot of supply and competition will drive pricing up.
  • Market is busy, constant feed of opportunities. Factors to consider when considering an M&A: 
  • Believe in culture and people – most important factor
  • Regulatory background
  • Does it fit with strategy?
  • Integration – how does this work?
  • Buy-in, culture and alignment of proposition – vital points 
  • Financial planning services are becoming popular
  • For every acquisition, 2 or 3 never go beyond the initial discussion
  • Platforms – it can be difficult to shift assets. They haven’t considered single-platform in their integration plans.
  • Centralised platforms – this is a driver. Small firms realise the need for this so look to larger firms for their centralised platforms.
  • MIFID 2 is a driver
  • Two forms of power: Positional power and personal power. (Politics).
  • Human dynamic can derail financial opportunity. E.g. people live in fear and there is lots of sickness, corridor conversations etc. which change productivity.
  • How do you evaluate the right fit? Is there MI?
  • International mergers create an additional layer of complexity.
  • A lawyer specialising in regulation agreed that the regulatory history and culture needs to be addressed. Process is getting longer and having an impact on valuation.
  • Three factors: 
  • % of assets
  • Recurring income streams 
  • MIFID II is just the beginning and that platforms and systems held together weakly are a driver for acquisition.

Expert: Stuart Dyer, Founder, Soprano Consulting

Facilitator: Paddy Lewis, Consultant, Sionic 

Soprano Consulting