2017 closed with plenty of Corporate Finance activity across the Financial Services sector. Looking back on what has been a record year in terms of volumes of transactions, it is FinTech, including FinTech ventures, which stands out, having accounted for just over half of all transactions. Back in 2015, it represented about one third of the volumes. But, since then, it has been a major contributor to capital flows with over £900m raised for over 100 new ventures last year, including challenger banks, alternative payment providers and software developers. This increased by two-thirds in volumes and doubled in values compared to 2016, reflecting the disruptive force of technology and the impact of regulation on the industry in recent years.
Record high volumes of deals were also noted in the insurance sector last year. As was seen in December, private equity played a key role in the consolidation and shaping of the industry along with international groups continuing to restructure their involvement in the UK. The developments in the Investment and Lending sectors were similar, albeit in lower volumes but higher average transaction values than in 2015. With the continuing need for capital and liquidity in a rapidly changing environment, we look forward to helping our clients seize unique opportunities of creating value in the year ahead and hope you will contact us for a review of your strategic options.
Insurance
December was another active month for M&A in the Insurance sector. Hyperion, owner of Howden, RK Harrison and DUAL, announced the sale of a $400m minority stake to CDPQ, the Quebec institutional investor for public pension plans, together with a debt refinance for $300m. The Broker Network acquired Thompson & Richardson, the Lincolnshire-based commercial broker with four offices and £27m GWP; PIB Group acquired Lloyd’s broker Citynet Insurance Brokers with its 70 strong team and specialist product expertise and GRP-owned Higos acquired GMM Commercial Insurance Services.
Private equity investors were busy with Pollen Street Capital set to acquire Miles Smith, the 220 staff and £170m+ GWP London-based broker and B.P. Marsh announced a £5m investment for a 20% stake in EC3 Brokers, the specialist in reinsurance and programme business which had £8m revenue in 2016. Also in the London market Tysers, the Lloyd’s broker, announced the acquisition of the Londonbased commercial lines book of Cosmos Services, the Hong Kong-based subsidiary of the Japanese global trading firm ITOCHU Corporation.
Announced at the beginning of the New Year, Tempcover, the specialist short term cover broker, completed an MBO for £13.3m backed by private equity firm Connection Capital. The private equity backed and branch focused personal and commercial lines broker, A-Plan, announced that it will be acquiring Endsleigh from Zurich, Endsleigh is well known for its long heritage in the student market and has been through a period of transformation.
On the international scene Denmark’s largest insurance company, Tryg Group announced the acquisition of competitor Alka Forsikring for £1bn, Navigators, the US insurer, acquired two Belgian insurance companies, Asco and BDM, and Compre, the private equity backed run-off specialist, acquired two run-off books worth €300m from the US and UK branches of Generali, the Italian-based international insurer. Just into January Markerstudy announced that it had signed an agreement for the sale of its Gibraltar-based insurance companies to Qatar Re.
Investment
Old Mutual Wealth (soon to be renamed Quilter) confirmed it had agreed to sell its asset management business, Old Mutual Global Investors, with £25.7bn AUM, to US private equity firm TA Associates for £600m, paving the way for the stock market flotation of Old Mutual Wealth / Quilter next year. Other bidders for the business were rumoured to have included another US private equity group, Carlyle, and two Australian financial services groups, Challenger and Macquarie Investment Management.
Swiss Re agreed to purchase 1.1m life insurance policies from UK financial service provider Legal & General Group for £650m. The policies will be managed by ReAssure, the UK closed life book consolidator within the Swiss Re Life Capital business.
Punter Southall Group announced the intention to merge its actuarial, investment consulting and administration businesses with Xafinity to create a pensions consultancy business with approximately 900 employees in 15 offices across the UK, around 1,000 clients and revenues of over £100m. Under the proposed deal, Xafinity will acquire the actuarial consulting, pensions administration and investment consulting businesses of Punter Southall Group for up to £153m in a combination of £92.5m in cash and the balance in shares. As a result, Punter Southall Group will become the largest single shareholder in Xafinity.
Embark Group and Mazars announced a joint venture, combining their employee benefits consultancy arms into a single company called Vested to target small and medium-sized businesses. In a separate deal, Embark Group also agreed to sell its financial planning business, RCL Consultancy, to Mazars.
The senior management of the London-based specialist asset manager GVQ Investment Management entered into an agreement to acquire the business from RIT Capital Partners. GVQ manages £700m through two Dublin-listed open-ended funds and a London-listed investment trust.
Technology firm FNZ made a strategic investment in robo-adviser Advicefront, which is also backed by other leading financial planning figures including former Bloomsbury Financial Planning principal Jason Butler, Tilney investment director Charles McKinnon and consultant Brett Davidson, who is director of FP Advance. State Street Global Advisors took a strategic minority stake in online pension manager PensionBee to expand its white-label product line and offer pension consolidation services to banks and life companies.
Elsewhere in the financial advisory space, LEBC Holdings acquired Aspira Corporate Solutions, the Bristol-based IFA and employee benefits consultant with £0.5bn of client assets under advice, for a mixture of cash and shares valued at £5m. Fairstone completed the acquisition of Glasgow-based Professional Partners bringing approx. £160m of AUM. AFH Financial Group bought Chichester-based JW Wealthcare for up to £1.1m and Arthur J. Gallagher & Co bought Gatehouse Consulting, a London-based internal communications and employee engagement specialist.
Lending
It was a traditionally quiet month for M&A in the lending markets as 2017 closed.
In the asset finance market, Haydock Finance announced that certain investment funds managed by affiliates of Apollo Global Management had signed an agreement to acquire a majority shareholding in Haydock, investing alongside Haydock’s founder and executive chairman Jon Wilkinson. The existing management team will continue to run the business. Elsewhere, Investec made two acquisitions: Investec Bank acquired Amicus Commercial Finance and Investec Asset Finance acquired the block discounting portfolio of Lombard to broaden its footprint in the market. Terms were undisclosed.
In the consumer finance market, Academy Leasing (the wholly-owned subsidiary of 1pm) announced that it had acquired Wirral-based motor finance brokerage, CarFinance2U. Secure Trust Bank announced the sale of an unsecured personal loan portfolio with net book value of £48.5m to Alpha Credit Solutions 8, a company owned by AnaCap Credit Opportunities III. The sale of the portfolio represents a full exit by Secure Trust Bank from the unsecured personal loan market The net proceeds from the sale are expected to amount to c £36 6m Oaka mmarket. The net proceeds from the sale are expected to amount to c.£36.6m. Oakam raised £35m through a debt investment from Victory Park Capital which will enable Oakam to provide an additional £200m to unbanked communities.
In the challenger banking sector, The Bank of England approved the takeover of loss-making Harrods Bank by digital challenger Tandem, following earlier speculation that ex-Barclays CEO Bob Diamond was considering a £10m investment into Tandem through his private equity vehicle Atlas Merchant Capital.
FinTech
In payments, Fintrax Group, the digital payment processor for international shoppers, completed its acquisition of Planet Payment, the provider of international and multi-currency processing services, in a €219m deal. Digital money transfer service WorldRemit raised $40m in a Series C round led by LeapFrog Investments, with significant participation from existing investors Accel and Technology Crossover Ventures, and card payments business iZettle raised €40m from VC firm Dawn Capital and The Fourth Swedish National Pension Fund, alongside existing investors. The Moneycorp Group will acquire foreign exchange business Novo Mundo Corretora de Cambio, having signed an initial investment agreement in August 2015. Moneycorp also acquired currency firm First Rate FX. Technology development company Black Cactus Global acquired World on Wireless, which provides white label payment systems and services to banks, financial institutions, remittances companies and retail chains.
FINIATA, the finance platform targeting SMEs, freelancers, and the self-employed, raised €18m in a Series A funding including €10m by VC firms DN Capital, Point Nine, Fly Ventures, Redalpine, ENERN and Kulczyk Investments. An additional €8m was raised in debt financing. Private equity firm Vitruvian Partners invested in Smava, the online social lending platform that facilitates peer-to-peer lending services, and banking and compliance platform Railsbank joined Mastercard’s Start Path program, which provides operational support, commercial access and strategic investment to support development of its open banking platform. SBDA Group, an artificial intelligence customer engagement provider to retail banks, raised Series A funding from FinSight Ventures and Digital Space Ventures to expand the product suite and grow the team.
Elsewhere, Astorg Partners-backed investor services firm SGG Group acquired trust, corporate, real estate and fund administration services provider First Names Group from AnaCap Financial Partners, Connection Capital backed a £13.3m management buyout of short-term insurance business Tempcover, providing £7.5m of the financing with Santander backing a £5.75m debt facility.
UK mathematician and Tesco Clubcard architect Clive Humby is credited with coining the phrase “data is the new oil”. The value of this new oil in the financial services sector has been highlighted through numerous transactions over recent years and last month saw a further interesting development on this front with Ion Investment Group, the trading and workflow software group, acquiring a controlling stake in Dealogic, the financial content and analytics provider. Continuing the theme, last month also saw deals involving a quantum computing start-up, a credit report supplier and a research discovery and management platform, amongst others.
We have increasingly seen the innovative use of data to differentiate business models in the financial services industry over recent years, whether through artificial intelligence, machine learning or predictive analytics. Based on our work with a wide range of investors we believe this will continue to be a significant driver of strategic value in years to come.
Please see below for further commentary on the deal activity in the UK financial services sector last month and feel free to contact us if you are seeking advice on your strategic plans.
Insurance
November saw some significant transactions. Allianz, the German insurer, announced its intention to spend almost £2bn buying out minority shareholders in Euler Hermes the credit insurance company with substantial operations in the UK. BGL, the UK personal lines group, announced that the Canada Pension Plan Investment Board had invested £675m in the group and, as a result, the planned IPO was shelved while BHL continues to be the majority shareholder. Aviva announced it had acquired the Irish insurer, Friends First, for £116m, subject to regulatory approval, which will take its share of the Irish life and general markets to 15%. Go Compare, the listed insurance aggregator, rejected a c. £460m offer from Zoopla owner ZPG.
Elsewhere, Bollington, the corporate and commercial motor broker, merged with Wilson Insurance Brokers, the personal lines broker headquartered in Manchester, having secured an investment from Inflexion Private Equity, which also acquired Groupama’s stake in Bollington. The transaction creates a £120m GWP group with a strategy to expand across the UK and develop new product lines. GRP-owned Higos acquired Mellerups, a Gloucestershire-based rural activities specialist, and Gloucester-based commercial broker Cass-Stephens acquired D Paxman, a commercial broker in Malvern.
Private equity firm Preservation Capital acquired a substantial stake in Ascent Underwriting, the cyber and specialist lines MGA, with the intention of developing new product lines and acquiring specialist/emerging risk MGAs. Internationally, B.P. Marsh investee company XPT Group Inc acquired Western Security Surplus Insurance Brokers, a wholesale and MGA business and Bermuda-based Ascot Group launched Ascot Re, a reinsurance business, having received an additional $1bn of funds from the Canada Pension Plan Investment Board.
Investment
ETF Securities agreed to sell its $17.6bn European business, covering exchange- traded commodity, currency and short-and-leveraged products, to ETF specialist WisdomTree Investments, the New York-based group. In the same week, ETF Securities also announced that it had agreed to sell its European ETF platform, Canvas, which has some $2.7bn of AUM, to Legal & General Investment Management.
Prudential sounded out potential buyers as it prepares a break-up of its £10bn annuity book in the UK, according to reports. It told buyers that four chunks of the annuity book, valued at between £2bn and £3bn each, will be offered.
Principal Global Investors, the asset management arm of Principal Financial Group, announced the acquisition of Internos Global Investors, a pan-European full service real estate investment management firm, headquartered in London, with $3.25bn of AUM.
In the wealth management sector, AFH Financial completed the acquisition of Colchester-based IFA, Britton Financial, for up to £2.1m. It also announced the intention to raise £15m through a share placement to finance its acquisition strategy and subsequently increased the placement to £17.5m in response to the strength of investor demand. Succession Group bought Accountants Financial Services and H&L Financial, the holding company for Inspire Wealth Management, for an undisclosed amount. The deals add more than £400m in funds under management to Succession Group. Newell Palmer bought Wolverhampton-based Treble Investments and Bromsgrove-based Haven Financial Services, increasing its AUM to £1.7bn. Ludlow Wealth Management acquired Edinburgh and St Andrews-based adviser firm Whyte Sharp, and Old Mutual Wealth Private Client Advisers acquired Coleman Clough, adding £33m of assets under advice. Thesis Asset Management agreed to acquire Cambridge Fund Managers, adding £30m of AUM.
Elsewhere in the sector, Embark Group, which provides services to around 110,000 consumers and administers some £11.5bn of assets on their behalf, announced it is considering whether to float on the London Stock Exchange. Permira, the private equity fund, bought Duff & Phelps, the valuation and corporate finance group, from Carlyle Group and, in the employee benefits and pensions consultancy market, Broadstone acquired Mitchell Consulting and 2020 Trustees.
Lending
It was a very quiet month for M&A in the lending sector. Following the prior month’s announcement of an indicative proposal, the boards of Aldermore Group and FirstRand International announced that they had reached agreement on the terms of a recommended cash offer for the entire issued and to be issued ordinary share capital of Aldermore, valuing the company at c.£1.1bn. Barclays announced that it had further reduced its shareholding in Barclays Africa Group by 7.0% to 14.9%, which represents its desired long-term shareholding in Barclays Africa Group and that no further sales were currently planned.
In HM Treasury’s autumn budget, the chancellor announced the government’s intention to recommence the privatisation of the Royal Bank of Scotland before the end of 2018‐19 and to carry out, over the forecast period, a programme of sales expected to dispose of c.£15bn worth of shares, representing approximately two thirds of its stake at current market prices. Monzo announced the closing of its latest fundraising round, raising £71m from Goodwater Capital, Stripe and Michael Moritz (through his charitable investment vehicles). Victory Park Capital announced the expansion of its strategic partnership with Borro by taking a majority stake in the business.
Elsewhere, Cabot Credit Management announced that it had completed the acquisition of Wescot Credit Services, but separately announced that it would not be proceeding with an initial public offering on the London Stock Exchange, citing current IPO and broader market conditions. Arrow Global Group announced the completion of its acquisition of Mars Capital’s UK and Irish mortgage servicing businesses. BNP Paribas Asset Management acquired a 10% stake in credit provider Caple, allowing for a partnership to offer alternative credit to European small and medium-sized enterprises. 1pm announced the issue of new ordinary shares valued at c.£1.5m to satisfy earn-out consideration due to the shareholders of Academy Leasing and Bradgate Business Finance.
FinTech
The data analytics sector was active in November. Ion Investment Group acquired a controlling stake in the global financial information provider, Dealogic, in a deal valuing the business at about $870m. The deal leaves private equity firm Carlyle and Dealogic’s management with a minority stake in the company. A C$45m Series B funding round for quantum computing startup 1QBit Information Technologies was completed by Fujitsu with other investors including Allianz, CME Group’s venture arm, Accenture and Royal Bank of Scotland. Santander invested in Credit Reporting Agency, the holding company for Checkmyfile.com, which offers consumers online access to credit reports, to support a secondary buyout and future growth plans. Visible Alpha, the research, financial models and corporate access events business, acquired Alpha Exchange, an innovative research discovery and management platform for investment professionals. Luminance, the legal profession artificial intelligence platform, closed a $10m Series A funding round, valued at $50m, led by Talis Capital and also including Invoke Capital and Slaughter and May.
In trading technology, Euronext acquired The Irish Stock Exchange (“ISE”) in a transaction valued at €137m on a debt-free/cash-free basis, excluding regulatory capital requirements estimated at €21.8m, creating a leading player in debt and fund listings and combining ISE’s listing and Euronext’s traded markets expertise. Legal & General Investment Management acquired Canvas, the European exchange- traded fund (“ETF”) platform owned by ETF Securities, including the embedded infrastructure for ETFs, as well as $2.7bn of existing assets across 17 products and partnerships. OTCX, the over-the-counter derivatives platform, secured backing from the Angel CoFund as part of its latest funding round. And, finally, cryptocurrency site Bitcoinmag.de was acquired by affiliate firm Investoo Group for an undisclosed amount. Bitcoinmag provides news and resources to cryptocurrency investors such as comparing prices and exchanges.
In payments, Inflexion Private Equity’s Partnership Capital fund agreed a £150m investment in Radius Payments Solutions, a leading fleet payments and telematics provider to small and medium-sized fleets across Europe, North America and Asia, valuing the business at £800m. Allied Irish Bank invested €30m in B2B payments platform TransferMate, valuing the company at up to €300m and Magenta Partners invested £10m in a significant minority stake in the online payment services provider Trustpay Global.
In insurance technology, Acturis Group, the software as a service provider to the general insurance industry, announced the acquisition of the insurance software business of ICE from Hubio Technologies, including ICE Claims, ICE Policy, ICE Billing, ICE Analytics, ICE Rating and ICE Digital. Xceedance, the insurance consulting and managed services provider, announced a Series A equity investment in ChainThat, the blockchain specialist organisation serving the re/insurance industry and Zego, the commercial insurance provider for self-employed people, raised £6m in a Series A funding led by Balderton Capital with participation from existing backers, including LocalGlobe and other angel investors.
Canopy (formerly InsureStreet), the UK-based insurtech company focused on the property rental market, closed a further investment from Round Hill Capital, a real estate investment and management firm and Matic Insurance Services, a digital homeowner’s insurance agency, raised $7m in a Series A funding from Anthemis and ManchesterStory Group.
In lending technology, digital challenger bank Monzo raised £71m from Goodwater Capital and Stripe with existing backers Passion Capital, Thrive Capital and Orange Digital Ventures making follow-on investments.
The UK challenger banking sector remained active in October with the flotation of Charter Court, a public offer for Aldermore and a capital raising for OakNorth, involving combined valuations of over £2.5bn. Institutional investors’ strong appetite for the sector was also demonstrated in the placing of a sizeable stake in OneSavings Bank and the confirmation of floatation plans for Cabot Credit Management. The interest reflects the significant changes which are restructuring the credit markets and the opportunities offered through the application of new technologies.
Other parts of the financial services sector were also busy with money transfer business, TransferWise, raising $280m just after the end of the month, an interesting swap of assets between TMX Group and ICE, the transfer of a £19bn corporate pensions business from Zurich to Scottish Widows and a series of transactions agreed in the General Insurance market.
For more details on all of this, please continue reading about current developments in your sector in the relevant section below. Should you be interested to consider how best to position your business in the light of strong investor enthusiasm, please do not hesitate to contact us here at IMAS.
Insurance
The active acquirers were busy in October with County Group announcing two acquisitions: at the beginning of the month it acquired NMJ Insurance Brokers in Halifax; and, at the end of the month, it acquired Inspire Risk Management in Warrington, taking its overall GWP to £90m. GRP announced the acquisition of Poole-based commercial lines broker Alan & Thomas Insurance Group and Minority Venture Partners announced its investment in Borehamwood-based Heath Crawford & Foster.
The Ardonagh Group announced two acquisitions from Groupama, that of Carole Nash, the motorcycle specialist, for between £60m – £65m, and Mastercover, the Hertfordshire-based SME and personal lines business. Aon announced it had agreed terms to acquire Henderson Insurance Broking Group, the Hull-based commercial broker with 16 offices across England and over 400 employees, with the transaction expected to complete in December.
Vantage made its first acquisitions since it was acquired by US broker NSM Insurance last year, that of Midlands-based Maybury James, the holding company for classic car specialist, Peter James Insurance, and Stewart Miller McCulloch, an SME commercial broker. Other broking deals included Erskine Murray acquiring Offley Insurance Services in Cheshire, Insurance Linx acquiring Nelsons Insurance Brokers in Derbyshire and Denis O. Brown acquiring Carron Insurance Brokers in Annan.
In the London market, R&Q acquired the ProSight managing agency and the contract to manage the run-off of its Syndicate 1110 and Nexus Group acquired trade credit broker Credit Risk Solutions, with offices in Halifax, Manchester and Birmingham.
Tradewise, a Gibraltar-based motor trade and commercial vehicle insurer, raised £20m from Harwood Private Equity. Homelyfe, a personal lines insurtech business, raised an additional £2.4m in a funding round led by Talis Capital and Peterson Ventures.
Investment
Lloyds Banking Group agreed to acquire Zurich Corporate Savings, comprising £19bn of pensions and savings assets, from Zurich UK, boosting Lloyds’ Scottish Widows business by an additional 500,000 savers and some 200 employees. The consideration was not disclosed. There were also rumours that Scottish Widows were in advanced talks to acquire the corporate pensions book from Standard Life.
According to Sky News, two Australian groups, Challenger and Macquarie Investment Management, are among a small number of bidders for Old Mutual Global Investors (‘OMGI’), which runs some £25bn worth of assets. Other names reported as interested include private equity funds TA Associates, Hellman & Friedman and CVC Capital Partners.
Also in the asset management sector, Dalton Strategic Partnership spun out its private client business in a management buy-out, retaining a sizeable stake in the business which will be named RM Caldecott & Partners, and Gresham House acquired Hazel Capital, a UK manager specialising in new energy infrastructure, for £2.6m. Alpha Financial Markets Consulting, provider of specialist consultancy services to the asset and wealth management industry, announced its proposed admission to trading on AIM, raising gross proceeds of £35m for the business and £90m for the selling shareholders, achieving a market capitalisation of approximately £163m and a full exit for the private equity fund, Dunedin, which backed a secondary buy-out of the business in February 2016.
Aviva announced an agreement to acquire a majority shareholding in Wealthify, the low cost “robo” investment service, which it intends to make accessible to Aviva’s customers via MyAviva. Another digital investment service provider, Moneyfarm, acquired the technology of Ernest which provides personal banking services using artificial intelligence technology.
In the IFA sector, 1825, Standard Life’s wholly owned financial planning business, agreed to acquire Bristol-based Fraser Heath Financial Management, which has assets under advice (‘AUA’) of £352m. Fairstone added another £250m in assets under management (‘AUM’) with the completion of its fourth acquisition this year being Buckinghamshire-based Hase Osborne Asset Management, one of the firms in its ‘downstream buy-out’ programme. Newell Palmer agreed to buy Northampton- based, Lane Wealth Management, with £100m of client assets and AFH Financial bought Truro-based Duchy Wealth Management. London and Leeds-based Progeny Group bought Salisbury-based Chestergate Financial Planning.
Elsewhere in the Investment sector, Alantra Partners, a Spanish operator of a financial services and asset management firm, specialised in the mid-market segment, acquired Catalyst Corporate Finance, provider of corporate financial advisory and investment banking services focusing on mid-market companies, for a value of over £30m. Online stockbroker, Interactive Investor, acquired Trustnet Direct’s investment business to which Interactive Investor already provides custody and dealing services, and Foster Denovo acquired Buckingham-based employee benefits consultancy TEBC, which employs approximately 100 corporate client relationships.
Abroad, European Wealth agreed, in principle, to acquire financial services group Newbridge, a US-based national broker-dealer and registered investment adviser group with over 12,000 clients and approximately $1.7bn of AUM, for an initial consideration of $14.6m and a deferred consideration which has yet to be quantified. European Wealth is also proposing to change their name to Kingswood.
Lending
Activity in the banking market remained strong. Charter Court Financial Services Group successfully completed its IPO with the offer price of 230p per share implying a market capitalisation of c. £550m. Charter Court sold c. 40% of its total share capital, of which c. £20m represents a primary capital raise. OakNorth Bank announced it had raised £154m from Clermont Group (a Singaporean investment group), Toscafund Asset Management and Coltrane Asset Management. The consortium purchased c. 16% of OakNorth’s share capital, valuing the company at c. £934m. Subsequently, GIC was reported to have acquired a 10% shareholding in OakNorth from Indiabulls for c. £90m. Aldermore Group confirmed that it had received an indicative proposal from FirstRand regarding a possible cash offer for its entire issued and to be issued ordinary share capital, valuing the company at c. £1.1bn. Subsequent to the month end, a firm recommended offer at this level was made by FirstRand.
Equity capital markets remained robust, enabling a number of disposals. J.C. Flowers & Co. sold 20m shares in OneSavings Bank, representing c. 8% of its share capital, to raise gross proceeds of c. £75m. The Royal Bank of Scotland Group (‘RBS’) announced that its subsidiaries had entered into an agreement to dispose of RBS’s entire shareholdings in Euroclear to Intercontinental Exchange for total cash consideration of €275m. In addition, Cabot Credit Management announced its intention to proceed with an IPO of the company, with admission to the main market of the LSE anticipated in November 2017.
Elsewhere Motormile Finance announced that an entity of Copper Street Capital had acquired a majority interest in the company. SalaryFinance announced a £40m fundraising, led by Legal & General, and Property Master announced a minority investment by mortgage distributor First Complete, part of LSL Property Services.
FinTech
In trading technology, exchange group TMX Group acquired Trayport, the provider of pre-trade energy solutions for traders, brokers and exchanges from Intercontinental Exchange (‘ICE’) for £550m, including £350m in cash. In conjunction with the deal, TMX Group has agreed to sell Natural Gas Exchange and Shorcan Energy Brokers to ICE, valued at a combined £200m. ION Investment Group, the trading and workflow automation software solutions provider acquired Aspect, a cloud-based solutions provider for commodity trade and risk management, brokerage Vantage Global Prime acquired CFDs, options, futures, shares and spread betting brokerage Atom8 and, on the early stage side, app-driven trading start-up BUX raised €10.6m in a Series C round for product expansion. The funding was led by HV Holtzbrinck Ventures, with funds also received from Velocity Capital.
Lending technology was also active. OakNorth, the SME-focussed challenger bank raised £154m with The Clermont Group, Toscafund Asset Management and Coltrane Asset Management buying a 16% stake, thereby placing OakNorth in the $1bn+ valuation (or “unicorn”) category. Sovereign investor GIC subsequently announced the acquisition of a 10% stake in OakNorth for £90m from Indian conglomerate Indiabulls. The raise will support OakNorth’s build in lending and licensing its technology globally. Credit marketplace BankBazaar raised $30m in a Series D funding round led by Experian, the credit rating agency and information management company, following Amazon’s lead of the Series C funding round and existing backers including Sequoia Capital, Eight Roads and Walden International. Finally, Property Master, the digital buy-to-let mortgage start-up, announced a minority investment by First Complete, part of LSL Property Services, the residential property services provider.
In payments, money transfer business TransferWise raised an additional $280m to fund its continued expansion, particularly in Asia. Asset management company Old Mutual Global Investors and Silicon Valley venture capital firm IVP led the investment round with Sapphire Ventures, Mitsui & Co. and venture capital firm World Innovation Lab also joining as new investors. The previous backers Andreessen Horowitz, Baillie Gifford and Richard Branson reinvested as part of the fundraising. In addition, The ai Corporation acquired secure payments and transactions business SmartCentric Technologies International.
In investment technology, the listed venture capital firm Draper Esprit acquired Seedcamp’s first and second funds for £17.9m, which included a stake in money transfer specialist TransferWise. Interactive Investor (‘ii’), the online investment platform, acquired Trustnet Direct’s investment platform business, for which it currently provides white label services. Agreement has also been reached with other ii share-dealing white label partners including Telegraph Investor The Motley Fool ii share dealing white label partners, including Telegraph Investor, The Motley Fool and SharePrice, for customers to move to the ii brand. DC Thomson, the private media business, is partnering with Electronic Research Interchange (‘ERIC’) to develop its bespoke investment research offering for the post-MiFID II world with DC Thomson acquiring a material stake in ERIC. BMLL, a machine learning and big data business, raised £7m from investors including Oceanwood Capital Management, IQ Capital Fund and Angel CoFund. Finally, digital wealth manager Moneyfarm purchased the technology behind Ernest, the personal finance manager powered by artificial intelligence, to enable Moneyfarm to explore the use of a personal finance chatbot to help individuals manage their money and investments.
Elsewhere, RenovITe Technologies the payment solutions provider, acquired payments consulting company, Q-ATM to enhance its proposition to financial institutions, processors and retailers and private equity firm Livingbridge invested in specialist financial markets consultancy Catalyst Development. In fund administration, Apex Fund Services acquired Deutsche Bank’s Alternative Fund Services business adding $170bn in assets under administration and EQT Holdings, a provider of trustee and other fiduciary services, acquired a 60% stake in Treasury Capital, the independent fund governance services provider.
In the quarter ending September, deal activity in the financial services sector, measured by the number and values of transactions above £5m, were the highest and third highest, respectively, since we started collecting transaction records in 2011.
This was driven by healthy volumes in the general insurance and investment sectors but also, more significantly, by the continuing growth in the support services & FinTech sector. We saw private equity and venture capital funds playing increasingly active roles across all sectors, particularly in transactions below £100m of value. In September alone, they deployed over £1bn in buy-out financings and growth capital.
New ventures using lending technology attracted plenty of capital with Neyber, MarketInvoice and SalaryFinance raising a combined £200m. Selected incumbents also made investments in new FinTech businesses including Aviva’s acquisition of a majority stake in Wealthify, Standard Chartered’s strategic investment into Paxata and Direct Line’s acquisition of a 15% stake in Canopy.
Please see below for further commentary on the deal activity in the UK financial services sector last month and feel free to contact us if you are seeking advice on your strategic plans.
Insurance
September was relatively quiet with only one significant transaction being announced, that of the buy-out of Canopius, the Lloyd’s insurance business, from Sompo Insurance for $952m (£729m) with backing from a private equity consortium led by Centerbridge Partners. Sompo acquired Canopius for $970m (£594m) in 2014. Bermuda-based Axis completed its acquisition of Novae, the London-listed insurer following its increased takeover offer of approximately £478m.
Elsewhere in the sector, Markel agreed to acquire ECIC, which provides products for contractors and affinity groups across the UK building services sector, for an undisclosed amount. Sciemus, a specialty Lloyd’s MGA, has secured new investment from HSCM Bermuda and will re-brand to Argon Underwriting.
PIB, the private equity-backed commercial broking acquirer, was active again this month with the acquisition of aQmen, a specialist MGA focused on the charity and faith sectors, and Morton Michel, a Croydon-based specialist broker focused on the childcare sector. CETA, the specialist personal lines and schemes broker, completed an MBO led by John Bibby and backed by private equity firm Kester Capital.
Davies Group, the insurance services group, branched out and acquired Ambant, a specialist insurance provider, creating a new insurance division in the process. Charles Taylor acquired Metro Risk Management, a US claims third party administrator based in Long Beach California.
It was also reported that the AA and Hastings had talks about a general insurance partnership, which have now ceased.
Investment
Wealth and asset management consultancy, Alpha Financial Markets Consulting (AFMC), announced plans to list on the Alternative Investment Market (AIM) and create an exit for Dunedin, its private equity backer. AFMC has over 250 consultants and contractors across nine major cities around the world. It has now successfully listed on AIM with an initial market capitalisation of £163m.
Netwealth Investments, the online discretionary wealth manager, completed a second round of funding, raising an additional £10m from existing and new investors. ActiveQuote, the Cardiff-based comparison site and broker of health and protection insurance products, raised £400k from the Welsh Government Growth & Prosperity Fund as part of a £2m expansion programme.
Aon announced that it is buying the property investment management firm The Townsend Group, including its London-based subsidiary Townsend Group Europe, for $475m and, shortly after the end of the month Aon also completed the acquisition of Portus Consulting, the specialist employee benefits business. Brooks Macdonald sold Braemar Estates, the property management business, to Rendall and Rittner for £1.9m excluding net asset adjustments.
The consolidation of businesses continued in the IFA sector. Old Mutual Wealth Private Client Advisers acquired Cumbria-based financial planning firm Dodd Murray, adding another £205m to its client assets under advice. Chase de Vere announced that it is to acquire the financial planning business of Medical Money Management, which specialises in providing financial planning advice to medical, dental and other professionals with client assets under advice of £1.1bn, and Loyal North, being backed by Fusion Asset Management, bought Galashiels-based Lowland Financial. Fairstone invested in minority stakes in Chartermarque and Hammett & Petch Financial Planning, with options to buy-out the balances at the end of agreed integration periods, adding £200m of client assets under advice.
British investment firms were also busy abroad. Impax Asset Management Group entered into agreement to acquire American asset manager, Pax World Management, creating a group with combined AUM of £10.3bn. Under the terms of the deal, Impax will acquire 100% of Pax at an initial valuation of $52.5m, then make additional contingent payments of up to $37.5m in 2021, subject to Pax’s performance. According to The Irish Times, St James’s Place, has held discussions with Dublin-based boutique pensions and investment firm, Harvest Financial Services, which oversees about €1bn on behalf of pension funds, private individuals, corporations and charities.
Lending
In the lending M&A markets, Marshall Motor Holdings announced the proposed disposal of its wholly-owned leasing business Marshall Leasing to N.I.I.B Group (which trades as Northridge Finance), a wholly- owned subsidiary of the Bank of Ireland (UK) for gross cash consideration of £42.5m. The disposal is conditional upon regulatory approval. Following its administration, Fairpoint Group announced a number of disposals including the conditional sale of the entire issued share capital of its subsidiary IVA Insurance to Barkol for c. £0.45m plus an additional amount equivalent to the cash balance at completion, and that the business and certain assets of Debt Free Direct had been sold to Aperture Debt Solutions for c. £1.34m.
Neyber, the employee loan provider repayable through payroll, announced a new funding round of £115m, comprising debt and equity capital, of which £100m is provided by Goldman Sachs, which joins Police Mutual and Wadhawan Global Capital as core strategic investors. Insurance premium financing and software company PremFina raised $36m in equity and debt capital. Participants in the round included Talis Capital, Rakuten Capital and Draper Esprit.
Elsewhere ZPG announced that it had conditionally agreed to acquire Dot Zinc (which trades as Money.co.uk, a financial services comparison website) for £80m on a cash-free, debt-free basis, plus a performance-based earn-out of up to £60m. In the banking market, The Co-operative Group reported that it had sold its residual 1% shareholding in The Co-operative Bank following the latter’s capital reorganisation. The Royal Bank of Scotland Group announced that it had formally received approval from the European Commission for its alternative remedies package in relation to its remaining State Aid commitments and hence it would no longer be obliged to achieve separation and divestment of the business previously described as Williams & Glyn.
FinTech
Lending technology continued to be active last month. Neyber, the financial wellbeing provider, secured £100m in an investment round from Goldman Sachs which includes debt and equity as part of the recently completed Series C fundraising round. The business also secured £15m of lending capital from existing investors. Business finance company MarketInvoice signed an agreement with Varengold Bank which will provide £45m of funding for the businesses and Legal & General led a £40m investment into SalaryFinance, the start-up offering financing loans and savings, with Blenheim Chalcot also participating in the funding round.
Chinese insurer Ping An and consulting firm Oliver Wyman joined the £34m funding round for 10x Future Technologies, which offers a cloud-based plug-and-play platform to combine disparate legacy systems of incumbent banks. PremFina, the insurance premium financing business, announced a $36m equity and debt funding facility led by Rakuten Capital and Draper Espirit with other investors including Thomvest Ventures, Emery Capital, Rubicon Venture Capital and Talis Capital.
CivilisedBank, the start-up digital bank with a local banker network, agreed further funding from its current investor Warwick Capital Partners, the investment manager. The European financial deposit marketplace Raisin announced its first acquisition, that of PBF Solutions, the customer acquisition, onboarding and marketing services business, as it prepares to enter the UK savings market.
In investment technology, Greylock Partners, Mosaic Ventures, Founders Fund and Lakestar Capital invested $12.4m into venture backer Entrepreneur First and the crowdfunding platform Seedrs completed a £10m funding round led by a £4m investment from Woodford Investment Management with the remaining £6m funded through crowdfunding. BrickVest, the online real estate investment platform, announced a £7m fundraising round with Berlin Hyp, the real estate finance provider to the Savings Banks Finance Group.
In payments, cash management company Bankers Warehouse received a reported $30m investment from Apis Partners to grow its cash processing and cash-in-transit services and Earthport, the AIM-listed cross-border payments business announced a share placing with existing and new institutional investors, raising gross proceeds of £25m, representing c. 20.4% of the enlarged issued ordinary share capital. Direct Debit network GoCardless raised a further $22.5m from existing investors Accel, Balderton Capital, Notion Capital, and Passion Capital, to extend its reach across international borders and bitcoin firm Luno raised $9m in a Series B round, led by venture capital firm Balderton Capital.
In insurance technology, Direct Line Insurance announced a 15% equity stake in Canopy, the tenant rental and credit history service. Aviva agreed to acquire a majority stake in Wealthify, the low cost, ‘robo’ investment service for the UK mass market. Tax compliance and reporting software provider Sovos acquired FiscalReps, the Insurance Premium Tax (IPT) compliance provider, adding an indirect tax solution to its proposition. Sovos is owned by HgCapital and Vista Equity Partners.
In trading technology, London Stock Exchange agreed to buy an additional stake of up to 6.8% in its clearing arm LCH.Clearnet and Investoo Group, the FX and financial affiliates business, acquired the social trading comparison site SocialTradingGuru.com as well as portfolio management comparison site RoboAdvisors.com.
Elsewhere, identity verification provider Onfido raised $30m led by Crane Venture Partners with support from Microsoft Ventures, Salesforce Ventures and other current investors. The cybersecurity firm Digital Shadows raised £19m in a Series C funding round to grow its digital risk management service in a funding round led by Octopus Ventures with further participation from Passion Capital and Industry Ventures. Featurespace, the leading machine learning company for fraud prevention, raised £16.5m in a funding round led by Highland Europe, Worldpay Group (the payment processing company) and Invoke Capital with further funding from existing investors including Touchstone Innovations, NESTA and TTV Capital.
Standard Chartered completed a strategic investment and joint innovation agreement with Paxata, an enterprise information management company, which is designed to further accelerate the bank’s transition to a digital bank with a human touch and the visual intelligence provider, Geospatial Insight, raised a Series A growth equity investment led by VenturesOne.
Finally, Sanne, the alternative asset and corporate administration services provider, agreed to acquire fund services firms Luxembourg Investment Solutions and Compliance Partners for total initial considerations of €55m, split 36% in Sanne shares and the remainder in cash. Additional earn-outs are expected to be paid in 2019 based on performance and subject to an absolute consideration cap of €100m
As the autumn draws closer we are encouraged to see investors across our key sectors in the financial services industry are refusing to cool down.
Trade players were particularly active in August, announcing material deals including Allianz’s £500m acquisition of a 49% stake in Liverpool Victoria and contested offers for Smith & Williamson, with the latter now opting to pursue a listing on the London Stock Exchange despite the trade interest.
In fact, stockmarket flotations were the preferred option for many companies, reflecting the healthy appetite among investors for the sector. Charter Court Financial Services Group announced its intention to go down that route and LendInvest issued the first tranche in a £500m bond programme to be listed on the London Stock Exchange.
We also saw private equity funds taking the opportunity to realise gains amidst buoyant M&A conditions in the market. This was certainly the case with HgCapital successfully exiting its investment in the insurance technology platform, Sequel, with the sale to US-listed Verisk Analytics for £250m.
We hope the summaries below will keep you up to date on the current corporate finance developments in your sector and we look forward to discussing strategic options for your business or investments in the coming months.
Insurance
At the start of the month Allianz announced the acquisition of a 49% stake in Liverpool Victoria (LV) for £500m with an agreement to acquire a further 20.9% for £213m in 2019, valuing LV at £1.02bn and creating a £1.7bn personal lines insurer under the LV brand.
The active acquirers continued to be busy with GRP-owned Marshall Wooldridge acquiring ECS Insurance Brokers, a Sheffield-based commercial lines business. Broker investment firm Ataraxia backed the management buyout of EIC Insurance Services and, at the end of the month, Ardonagh, formerly Towergate, returned to the acquisition trail with the purchase of Petersfield-based pet insurance business Healthy Pets.
Norwich-based One Broker Group acquired fellow East Anglian broker Gibbs Denley Insurance Services, with offices in Swaveney and Bury St Edmunds. Travel specialist Staysure acquired Avanti Insurance, a rival travel insurance business, creating a combined base of 2m customers. Bennett Christmas continued its acquisitions with the purchase of Slade Edwards Insurance.
Looking internationally, JLT acquired Belgibo, a Belgian specialty broker, Aviva sold its 50% stake in Milan-based Avipop Assicurazioni, a provider of P&C insurance, to Banco BPM and Gibraltar-based Elite Insurance.
Investment
Smith & Williamson, the investment management, accountancy and tax advisory group with £19bn of AUM, attracted much attention after it was confirmed that they were in talks with Rathbones to agree a merger to create a wealth management group with client assets of £55bn. Rathbones, which manages £36bn of assets, would effectively take over Smith & Williamson, valuing Rathbones at £1.4bn and Smith & Williamson at £600m. It then emerged that Tilney, a rival wealth manager, was trying to gatecrash the merger by tabling an alternative all-cash bid for Smith & Williamson, according to Sky News. Rathbones and Smith & Williamson subsequently ended the talks. Smith & Williamson now intends to pursue a stockmarket listing that it had prepared before the talks began.
Canada Life announced an agreement to acquire Retirement Advantage, the annuity specialist, from funds managed by TDR Capital, for an undisclosed sum in a move that will further strengthen and broaden Canada Life’s position in the UK annuities, income drawdown and equity release markets. Prudential announced the merger of its two UK businesses, the life insurance arm and the asset manager, M&G, and the sale of its entire independent broker-dealer network in the USA to LPL Financial for $448m.
JC Rathbone Associates, the provider of treasury consultancy services and a subsidiary of JCRA Group, was subject to a management buy-out led by Jackie Bowie (CEO) for a consideration of £13.6m, £6.7m of which was provided by Connection Capital.
Avendus Capital, a provider of private equity investment services based in India, agreed to acquire 100% ownership of Ocean Dial Asset Management (trading as ODAM), a London-based asset management business and subsidiary of Ocean Dial Investment Company in Singapore.
ITI Group, a Russian operator of a brokerage firm which is backed by Da Vinci Capital, acquired Walbrook Capital Markets, a London-based provider of brokerage services in a variety of different assets.
In the IFA sector Sanlam UK agreed to acquire Tavistock Financial, a network of 158 financial advisers, along with 25 support staff, from Tavistock Investments for £1m. Succession acquired Sigma Asset Management, Prosperitas Independent Financial Advisers, Norris and Fisher Independent Financial Services for a total consideration of £20.6m. AFH Financial Group bought the assets of Martin Cooper Management in Worcester and Arden Financial Consultants in Birmingham.
Lending
In the banking markets, Tandem announced that it had signed an agreement to acquire Harrods Bank, subject to regulatory approval, and benefit from around acquire Harrods Bank, subject to regulatory approval, and benefit from around
£80m of capital coming into the business. The Co-operative Bank announced the successful completion of its restructuring and recapitalisation plan, and Charter Court Financial Services Group announced its intention to float on the London Stock Exchange.
Prodigy Finance, the international student loan provider, raised $40m in a Series-C equity round led by Index Ventures, with participation from Balderton Capital and AlphaCode, and also secured a $200m debt facility. Online platform for property lending and investing LendInvest issued a £50m retail bond and digital mortgage broker Habito raised £18.5m in a Series-B funding round led by Atomico with participation from existing investors, including Ribbit Capital, Mosaic Ventures and Revolutionary (Ad)Ventures.
In the debt purchase and collection markets, Cabot Credit Management entered into an agreement to acquire Wescot, a UK contingency debt collection and business process outsourcing services business, its second strategic UK acquisition this year following the investment in Orbit Services. In total Cabot has invested in excess of £100m in the acquisitions of both Wescot and Orbit. Arrow Global Group announced the proposed acquisition of Mars Capital’s UK and Irish mortgage servicing businesses for an enterprise value of £15.5m from funds advised by Oaktree Capital Management and its founders. In addition, Arrow Global Group also announced the establishment of a strategic partnership in the UK and Ireland with Oaktree Capital Management.
Elsewhere, City of London Group announced the acquisition of Milton Homes, a provider of equity release products for residential property, for £20.2m from DV4, a fund advised by specialist real estate investment advisory company Delancey. The consideration will comprise £13.2m in new ordinary shares and £7m in cash. City of London Group proposes to raise £11m through an equity fundraising. In addition, Pepper UK’s parent company in Australia, Pepper Group, announced that it was recommending shareholders vote in favour of its proposed acquisition by an affiliate of KKR.
FinTech
In lending technology, Prodigy Finance, which provides loans to students from emerging markets, raised $40m in a Series-C equity round led by London’s Index Ventures, with participation from Balderton Capital and AlphaCode, and also secured a $200m debt facility. Online platform for property lending and investing LendInvest issued a £50m retail bond on the London Stock Exchange as the first of a £500m bond programme intended to be rolled out in the next few years. Digital mortgage broker Habito raised £18.5m in a Series-B funding round led by tech investment firm Atomico with participation from existing investors, including Ribbit Capital, Mosaic Ventures and Revolutionary (Ad)Ventures, and challenger bank Tandem agreed to acquire 100% of Harrods Bank with the bank operating under the Tandem brand post completion.
In insurance technology, Verisk Analytics, the data analytics provider, agreed to acquire the insurance and reinsurance software specialist, Sequel, from HgCapital for £250m. Sequel had revenue and EBITDA of £26m and £12m, respectively, for the year ended June 30, 2017. Aviva Ventures, Aviva’s venture capital arm, announced an investment in Roost, the home telematics start-up as part of a $10.4m Series-B funding round with participation from Desjardins Insurance, Fosun RZ Capital and existing investors.
Gambling and financial trading software and services provider Playtech acquired selected assets from ACM Group to enhance its bespoke risk management and trading solution for up to $150m, with $5m payable upfront and two staged payments based on 1 x EBITDA for 2017 and 2018, as well as contingent consideration based on 5.2x 2019 EBITDA (less the 2017 and 2018 payments). Capital markets technology outfit Options raised $100m from private equity house Bregal Sagemount to invest in platform innovations and expand in key financial centres globally and ATMChain Foundation, sponsored by Jiangsu Huaxin Blockchain Research Institute of China (JBI), acquired c. 5.4% of RFintech, the energy market trading platform for €15m. Finally, The Gibraltar Stock Exchange sold a strategic 25% ownership stake to Cyberhub Fintech, an SPV owned by Broctagon Group, the Asia-based forex technology, trading and FinTech specialist.
In payments, Fiserv, the financial services technology solutions provider, acquired Dovetail Group, the provider of bank payments and liquidity management solutions, to enable Fiserv to develop fully integrated payments infrastructure. FairFX Group, the online international payment services provider, acquired payment services business CardOne for a consideration of £15m funded by a £25m conditional placing. The listed foreign exchange sector special purpose acquisition vehicle, Boston International Holdings, announced the reverse takeover of Cornhill FX Holdings for an undisclosed value subject to completion of legal and financial due diligence.
Elsewhere, Smarsh, the compliance, e-discovery and risk management business, acquired Cognia, the provider of cloud-based voice archiving, audio search and analytics. Business software provider Microgen acquired revenue management enterprise software provider RevStream for £9.7m, comprising £7.7m in cash, of which £5.4m was paid on completion and £2.3m becoming payable over two years, and the balance being satisfied through the issue of Microgen shares in August 2019. Santander’s fintech venture capital fund Santander Innoventures joined a $13.9m Series-B funding round for digital identity startup Socure and Infosys, the consulting, technology and services provider, acquired Brilliant Basics, the product design and customer experience (CX) innovator.
Notwithstanding an element of uncertainty created by Brexit, UK financial services businesses continued to attract strong interest from overseas investors during July 2017. Most notably Worldpay received a £9.1bn approach from US card processing firm Vantiv, Novae Group recommended a £470m cash offer from Bermuda-based Axis Capital, Allianz announced the acquisition of an initial 49% of Liverpool Victoria at £1.0bn valuation and Paysafe recommended a £3.0bn offer for the business from a private equity consortium of US-based Blackstone as well as CVC Capital Partners.
For some international investors, exchange rates may be playing a role given the weakness of Sterling relative to US dollar and Euro. For example, in the insurance sector where significant amounts of business are dollar denominated but overheads are in Sterling, it may have been a key factor. However, anecdotal evidence suggests that investors continue to look for quality assets, UK-based or otherwise, and for those that match specific investment criteria valuation continues to be strong.
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Insurance
July was an active month in the insurance sector, right at the start commercial lines brokers Aston Scott and Lark Group announced their agreement to merge in a transaction backed by Bowmark Capital, the major PE investor in Aston Scott. Nexus Group, the London based MGA group, had an active month following on from their acquisition last month, with a fund arising of £30m from HPS Investment Partners and existing investor B.P. Marsh, the acquisition of Equinox Global, a trade credit MGA, whose largest shareholder Beazley now becomes a shareholder in Nexus Group as well as continuing to provide underwriting capacity. Nexus also completed the acquisition of Zon Re, a US based reinsurance underwriting agency.
PIB, the Carlyle backed acquirer, was back in action acquiring Franklands Insurance & Risk Management, a professional risk broker, Green Insurance Group, the Global Risk Partners owned commercial broker, acquired specialist marine broker Collidge & Partners and fellow GRP owned broker Higos acquired Colin Fear Insurance, based in Somerset. Howden, the retail arm of Hyperion, acquired SME specialist broker Sterling Knight in Singapore.
Insurers were in the news with the recommended cash offer for Novae Group by Axis Capital, the Bermuda based specialist lines insurer and reinsurer, for £467.7m, a multiple of 1.5 to tangible net book value. Chaucer, the Inter-Hanover owned Lloyd’s insurer, acquired SLE Worldwide Australia, a property and casualty MGA focussed on the sports, leisure and entertainment sectors.
Pay-as-you-go broker Zego has raised £1.2m of additional seed capital in a round led by Local Globe as the company launches its first product underwritten by Aviva.
Just after the month end Allianz announced the acquisition of a 49% stake in Liverpool Victoria for £500m with agreement to acquire a further 20.9% for £213m in 2019, valuing LV at £1.02bn, creating a £1.7bn personal lines insurer under the LV brand.
Investment
In the life company sector, Aviva Group agreed to sell its subsidiary Friends Provident International to International Financial Group, formerly known as RL360 Group, for £340m. Friends Provident International has £7.6bn in AUM and 180,000 policyholders. International Financial Group is backed by funds managed by Vitruvian Partners.
Further consolidation took place among the stockbrokers and private client investment managers with Canaccord Genuity agreeing to acquire Hargreave Hale for £79.5m. Davy Group, the leading Irish stockbroker, acquired Danske Bank’s wealth management business in the UK and Fiske, the listed stockbroker and investment manager, agreed to acquire Fieldings Investment Management for £2.3m.
In the IFA market Bellpenny made its largest acquisition to date, merging with Ascot Lloyd, a nationwide firm with c. £3bn of assets under advice, nearly doubling the size of Bellpenny. The combined organisation has over 100 advisers and manages more than 40,000 fee-paying clients. Just before the beginning of the month, Mobeus Equity Partners provided £8m to back the management buyout of Ludlow Wealth Management Group, an independently owned financial planning business in the North West of England with over £850m of client assets. B.P. Marsh & Partners, the niche venture capital provider to early stage financial services businesses, announced that it had acquired a further 17.84% in LEBC Holdings for an aggregate cash consideration of £7.1m, increasing its shareholding in the national IFA to 60.87%. Fairstone Group acquired Lancashire-based Octagon Wealth Management and Torfaen-based Uskvale Financial Planning while AFH Financial Group bought the assets of Granville Bates, Johnson Birkett and G-Force Financial, and Newell Palmer acquired Wright Financial Planning.
Elsewhere in the sector, Aon agreed to acquire the fast-growing Employee Benefits specialist Portus Consulting.
Lending
In a relatively quiet month, Marlin Bidco announced that it had received the necessary regulatory approvals and that all of the conditions to its final offer for Shawbrook Group had therefore been satisfied or waived and, accordingly, the offer was unconditional in all respects. Metro Bank announced the successful completion was unconditional in all respects. Metro Bank announced the successful completion
of a cash placing of 8.02m new ordinary shares, representing c. 9.9% of the Company’s issued share capital and raising total gross proceeds of c. £277.9m for the Company. The Royal Bank of Scotland Group announced that it had been informed by HM Treasury that an alternative remedies package had now been agreed in principle with the European Commission in relation to its remaining State Aid obligation. It was expected to come into effect during H2 2017, upon which RBS will no longer be obliged to achieve separation and divestment of the business previously described as Williams & Glyn by 31 December 2017.
Elsewhere, STAR Asset Finance announced the continuation of its consolidation of the SME asset finance market by completing the acquisition of Credo Holdings. Belvoir Lettings, the UK’s largest property franchise, announced the acquisition of the entire issued share capital of Brook Financial Services, which trades as Mortgage Advice Bureau, for a total consideration of £2.0m, satisfied by £1.5m cash and the issue of £0.5m new ordinary shares in Belvoir. Also, Neyber, the provider of a lending pla orm for employers to offer loans to employees, secured £21m through a Series C funding from Wadhawan Global Capital with par cipa on from exis ng investors.
Just after the month end, Non-Standard Finance announced that it had agreed to acquire George Banco from its existing shareholders for an enterprise value of £53.5m, payable in cash. When combined with its existing guarantor loans business TrustTwo, Non-Standard Finance stated that it will be the clear number two in that market segment.
FinTech
Following US card processing firm Vantiv’s £9.1bn public offer for Worldpay Group announced in early July (and reported in our previous M&A monthly review), payments sector consolidation continues with private equity firms Blackstone and CVC Capital Partners agreeing terms, each on a 50:50 equity funding basis prior to potential equity syndication, to acquire listed payment solutions business Paysafe for £3.0bn. Whilst the acquisition has the Paysafe board’s recommendation, it is predicated on the sale of Paysafe’s Asia business which has been agreed with Spectrum Global for up to $308m payable over six years in order to manage Paysafe’s exposure to the Asian online gambling market amongst other factors. Simultaneously, Paysafe announced the acquisition of Merchants’ Choice Payment Solutions, the payment processing business, for $470m funded by a $380m loan and $90m existing cash funds to increase its products and processing scale for US ISOs and merchants.
Continuing in payments, private equity firm Permira acquired a minority stake in online payments business Klarna for an estimated $250m. London-based foreign currency provider Revolut raised $66m in venture capital investment to expand its operations further across Asia and North America led by international venture capital firm Index Ventures, with further backing from Balderton Capital and Ribbit Capital. UK cash allocation software solution business Rimilia raised $25m in a round co-led by Kennet Partners and Eight Roads Ventures to expand across Europe and the US and double the size of its team, banking and payments startup Curve raised $10m in a Series A funding round from Santander InnoVentures, Investec and Henry Ritchotte, former COO of Deutsche Bank, amongst others. Finally, in payments Valitor, the payment service provider, acquired Chip & PIN Solutions, the card based payment providers and Form3, the secure platform for global payments processing, raised $5m in strategic investment from Barclays, the Angel CoFund and several individual investors.
In lending software, Equiniti Group, the technology, finance and administrative services provider, were busy having acquired both Wells Fargo’s share registration business for $227m and the Nostrum Group, a developer of digital lending software for banks, finance companies, and retail brands. Neyber, the salary-based employee loan start-up raised £21m in Series C funding led by Wadhawan Global Capital, the financial services group, Neva Finventures, Intesa Sanpaolo’s corporate venture capital arm, acquired a stake in iwoca, the specialist provider of financing to small and medium sized enterprises, to fund a new system for providing financing to small customers with turnover of up to €5m. Arrowgrass Capital Partners acquired P2P lending service Lendico, Aire Labs, the artificial intelligence-based credit profile platform, raised $5m in Series A funding from Sunstone Capital and White Star Capital, MortgageGym.com, the yet-to-launch digital adviser, confirmed that GoCompare has become its third largest investor, after securing £2.5m from four other investors including Deutsche Bank, and private banking business Sella Bank Group acquired a 12.5% stake in mobile financial services and digital customer engagement solutions provider Vipera.
In trading technology, Nasdaq, the electronic screen-based stock market news, quotes and trading information provider, agreed to acquire Sybenetix, a provider of surveillance solutions, conduct risk measurement and performance improvement and Vela Trading Technologies, the provider of high performance trading, market data, and analytics technology, acquired Object Trading, a global provider of a fully- managed Direct Market Access (DMA) platform, pre-trade risk controls, and analytics applications.
Elsewhere, enterprise software provider Sage Group acquired accounting software provider Intacct for $850m, accountancy software startup Receipt Bank raised $50m in a Series B funding round led by venture capital firm Insight Venture Partners, Palatine Private Equity acquired The Bunker, the cyber security business and technology and operations provider Broadridge Financial Solutions acquired Spence Johnson, the global institutional data and intelligence provider to the asset management industry. The Riverside Company has agreed to invest in Impeo Software, the provider of software and provides IT consulting for insurance and financial institutions as an add-on to Fadata, its provider of insurance software and Santander InnoVentures the fintech venture capital fund of Santander Group, also announced a strategic investment into Pixoneye, which offers predictive personalization technology delivered on device.
Whilst the second quarter of this year delivered weaker volumes than the two previous quarters but ahead of the Brexit-impacted third quarter of 2016, we are noting how much technology is playing a role both in headline M&A deals as well as gradually becoming embedded in all processes across the financial services industry enabling new ventures to flourish. Last month alone saw the recommended £70m offer for digital banking technology platform Monitise, a peer-to-peer lender raise £32m, a robo-adviser attract €30m, an auto-enrolment provider £15m and a start-up insurance challenger raise commitments of up to £180m, just to mention a few. This was followed by the £9.1bn offer for payment processor Worldpay in early July.
All of these transactions demonstrate how investors value the opportunity that exists in improved processes, data collection and automation, increasingly leveraging artificial intelligence, machine learning and predictive analytics, for companies to provide services more rapidly and often more accurately as human intervention is minimised. However, the ultimate success of these business models are by no means guaranteed as demonstrated by the demise of Monitise from a share price approaching 80p in early 2014 to Fiserv’s recent offer at 2.9p per share.
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Insurance
June saw the confirmation of the £800m bond issue by KIRS, the name of the newly formed consolidation of the Highbridge and Madison Dearborn insurance interests, including Towergate, Autonet, Price Forbes and Ryan Direct, placed at 8.375% for its £400m offering and 8.625% for its $520m offering.
Global Risk Partners, the PE-backed insurance investment group, announced the acquisition of a majority stake in Green Insurance Group, a south east based commercial lines insurance broker and Arthur J Gallagher acquired Total Reward Group, a Kent-based consultancy offering remuneration support, executive search, interim placement and training.
R&Q Group has sold, subject to regulatory approval, its Lloyd’s managing agency, R&Q Managing Agency, which manages Syndicate 1991 with primarily third-party capacity of £127m and Syndicate 3330, whose capacity is provided by the Group and will continue to be so after the sale. Neon, the Lloyd’s insurer acquired Sapphire Underwriters, a Guernsey-based Lloyd’s coverholder which provides D&O, PI and Cyber coverage to UK and local offshore brokers, from Heritage Group who founded the business with Nigel Brand.
Nexus Group, the London-based specialty Managing Agency announced the acquisition of Vectura Underwriting, a specialist Marine Cargo underwriter and Lloyd’s coverholder, from Aquila Underwriting.
Investment
New providers in the sector were given substantial support this month including Gryphon Group Holdings, a start-up insurance challenger offering life cover, critical illness cover and income protection, who raised £180m with backing from Punter Southall Group and Leadenhall Capital Partners. Health cash plan provider Medicash invested £4m in exchange for a minority stake in Now Healthcare Group, the provider of digital healthcare services and Blackrock, the largest asset manager in the world, led a €30m funding round alongside two existing German venture capital backers for robo-adviser Scalable Capital in exchange for a large minority stake in the business and Smart Pension, the pension auto-enrolment provider, raised £15m in a Series B funding round from investors including the Stensrud family who owns the Norwegian asset manager Skagen.
Regit Bidco, a special purpose vehicle backed by a consortium of Jersey-based investors, including Daniel Mytnik, a former partner at Palamon Capital Partners (a backer of Tilney, formerly Towry), offered to buy Thesis Asset Management, the wealth manager with some £2.3bn AUM and £10.5m AUA, for £47m. Coram Asset Management agreed to acquire specialist discretionary fund manager Minerva Fund Managers.
Pollen Street Capital, the private credit and equity fund manager and MW Eaglewood, the private credit fund manager, progressed their previously announced plans to merge which would lead to Pollen Street’s shareholders becoming the majority holders and Marshall Wace, the shareholder MW Eaglewood, becoming the minority holder in the combined entity.
In the IFA sector, Old Mutual Wealth’s Intrinsic added 300 advisers after the acquisition of the adviser network Caerus Capital Group received shareholder and regulatory approval. It also took a minority stake in its largest member firm, Charles Derby. Just after the end of June, Bellpenny and Ascot Lloyd confirmed their merger, creating a £6bn AUM financial planning group. AFH Financial acquired London-based Parker Sage Independent Financial Advisers for up to £5.6m and protection specialist Eunisure for up to £4.5m, and Alexander Beard Group bought McGowan Associates.
Link Administration Holdings, the Australian provider of services that connect superannuation funds and corporate clients through its technology-enabled platforms, announced it had entered into a binding agreement to acquire Capita Asset Services, the provider of financial outsourcing services, from Capita for a consideration of £888m.
Record, the currency investment manager, announced a tender offer to buy back its own shares to return approximately £10m to its shareholders and Arden Partners, the stockbroking and corporate finance advisory firm, raised £5.1m via a placing of ordinary shares with institutional investors.
Lending
The banking market continued to dominate M&A within the lending markets in June. Marlin Bidco, a company jointly owned by funds managed and/or advised by Pollen Street Capital and funds advised by BC Partners, announced an increased and final cash offer for Shawbrook Group. The final offer of 340p per share valued the entire issued and to be issued ordinary share capital of Shawbrook at c. £861m. Following announcement that the offer had been declared unconditional as to acceptances, Shawbrook’s independent directors announced that they would recommend acceptance of the offer given that Shawbrook would be delisted in the event that the offer was declared wholly unconditional, notwithstanding that they continued to believe that the final offer undervalued Shawbrook.
The Co-operative Bank announced the agreement on the terms of a capital raising plan to secure the long-term future of the bank, which would result in the Co-op Group’s shareholding falling from 20% to c. 1%. Additional capital of c. £700m is to be raised in total, positioning the Bank to meet regulatory capital requirements in full in the medium term. As part of the plan, the Bank and the Co-operative Group have agreed principles with Pace Trustees to separate their respective sections of The Co-operative Pension Scheme (Pace).
In other banking transactions, Metro Bank announced that it had completed the purchase of a portfolio of UK mortgages from Cerberus European Residential Holdings for £596.7m. The portfolio consists of c. 92% buy-to-let mortgages, with the remainder being owner occupied. The portfolio is being acquired at a discount to par. Aldermore Group announced the acquisition of a 48% minority equity stake in AFS Group Holdings, an introducer to asset and commercial finance funders in the UK.
Elsewhere, 1pm announced the acquisition of Positive Cashflow Finance, the factoring and invoice financing provider, for a maximum consideration of £9.0m, satisfied by the payment of £4.3m in cash on completion, a further £2.2m in loan notes and up to £2.5m in new ordinary shares based on a three year earn-out. Zopa announced it had completed a series of transactions adding up to £32m in investment and secured two new major investors. The additional investment will finance Zopa’s continued growth and product development, and support the build- out of the bank infrastructure in preparation for the submission of a bank licence application later this year. The investments were led by Wadhawan Global Capital and Northzone, which join existing backers Arrowgrass, Augmentum Capital, Bessemer Venture Partners and Runa Capital.
FinTech
Sector consolidation continues in payments following an £9.1bn offer by Vantiv, the US card processing firm, for Worldpay Group announced on 5th July to create a global player in payments with a focus on merchant services in the US, Europe, Asia Pacific and South America. Yoyo Wallet, the mobile payment and customer loyalty platform, raised a £12m Series B round, led by the US wholesale and food retailer Metro Group, joined by Woodford Investment Management and Touchstone Innovations, currency exchange business Revolut has taken venture debt from Triple Point Capital with a significant Series B funding round understood to be in the pipeline and CMA, the Competitions & Markets Authority, approved the sale of Diebold UK & Ireland to Cennox, the ATM & banking services company.
In banking and lending technology, Fiserv, the provider of financial services technology solutions, agreed terms of a recommended cash offer to acquire Monitise, to accelerate Fiserv’s digital strategy. The offer to acquire is at 2.9p per share and values the entire issued and to be issued ordinary share capital of Monitise at approximately £70m. PayBreak, the consumer finance platform, raised £24.5m from existing and new investors to accelerate the further growth of the company and banking startup Tide the digital-only banking app aimed at small businesses, raised $14m in a Series A funding round led by fintech investor Anthemis, along with Passion Capital, LocalGlobe and Creandum. Challenger bank Atom secured a £30m Tier Two capital facility from British Business Bank Investments to fund its UK growth plans and Soldo, the multi-user spending account firm raised $11m in Series A funding led by Accel with further funding from Connect Ventures, InReach Ventures, U-Start and R204 Partners.
In insurance technology, UK start-up insurer Gryphon raised £180m from Punter Southall, the pensions adviser, and Leadenhall Capital, a specialist insurance asset manager. Gryphon is planning to sell life insurance in the UK leveraging the potential of insurtech to build intuitive products and processes. Zurich together with Cover-More announced the acquisition of Halo, a specialist online rental car insurance platform.
In trading technology, TP ICAP, the interdealer broker, invested in LiquidityChain, the web-based application allowing users to be connected using a dark pool, non- execution platform to unlock liquidity in the global credit markets. IHS Markit’s Know Your Third Party (KY3P) risk management utility received investment from Barclays, Goldman Sachs, HSBC and Morgan Stanley, with the four banks taking an equity stake in the solution.
Elsewhere, Capita sold professional services business Capita Asset Services to Link Administration Holdings for a cash free, debt free consideration of £888m, private equity firm BC Partners agreed to sell a c.30% stake in the financial intelligence company Mergermarket Group to GIC, Singapore’s sovereign wealth fund and SME auto-enrolment solutions provider Smart Pension secured £15m in Series B funding from the Stensrud family, the owner of Norwegian asset manager Skagen plus other individuals. Callcredit Information Group, backed by private equity firm GTCR, acquired fraud prevention and anti-money laundering software solutions specialist Confirma. AimBrain, a biometric identity platform, has closed a £4m series A funding round led by BGF Ventures and predictive analysis specialist Logical Glue secured funding from Tom Singh, founder of U.K.-based fashion retailer New Look, to support continued development of its machine learning and statistical modelling platform.
The ever-increasing capital raised by private equity funds has historically shaped major changes in the financial services industry and last month was no exception.
US private equity houses Highbridge and Madison Dearborn, both active acquirers in the insurance industry in recent years, announced a five-way merger centred around insurance broker Towergate to create a significant new player in the sector with annual revenues of £500m and 5,000 employees. Up to £800m of debt is expected to be refinanced in the capital markets by the new group.
The combined group intends to run the five businesses separately, each with its own management team. It will be interesting to see how HPS and Madison Dearborn will generate significant synergies with the operational separation.
Another significant development we are seeing in the market is perhaps the maturing of the FinTech industry as financial technology start-ups are adopting more focussed labels to convince strategic partners and investors of their relevance.
FinTech spans a wide range of business models from mobile payments to challenger banks to peer-to-peer lending to trading technology for capital markets. Some are arguing that FinTech is such a broad term now it is becoming meaningless. “FinTech” or not, we expect technology to become increasingly important across financial services, including in payments (“Paytech”), compliance (“Regtech”) and insurance (“Insurtech”).
If you want to discuss any of these developments and how to manage your corporate finance strategy, we would be delighted to hear from you.
Insurance
The main news in May was the announcement that Highbridge and Madison Dearborn intend to consolidate their insurance investments into one general insurance group, including Towergate, the SME and corporate commercial broker, Autonet, the van and motor car broker, Chase Templeton, the healthcare broker, Price Forbes, the international specialty business and Ryan Direct, the insurance services and claims management business. Subsequently, KIRS, the name of the new Group, announced that it was offering an £800m bond, which has been priced at 8.375% for its £400m offering and 8.625% for its $520m offering, and a £990m credit facility.
Broker Network has acquired its second business, Boyd Insurance, an existing network member managing £12m GWP and based in Paisley; it will be the focus of further acquisition in its area.
Investment
In the wealth management sector, Old Mutual Wealth Private Client Advisers acquired Cheshire-based advice firm Maestro Financial Services. Old Mutual also stated that they aim to demerge Old Mutual Wealth at the earliest opportunity in 2018 via a flotation of the business on the London and Johannesburg stock exchanges. Succession Group acquired Paul Jones Financial Services and Equity Invest, two of its affiliated members. A consortium of investors headed by former Conservative party treasurer Lord Stanley Fink bought out Hay Hill Wealth Management, which until recently traded as Glendevon King, and rumours circulated about Ascot Lloyd being close to agreeing a sale to Bellpenny.
Elsewhere in the sector, Nevada Investments bought the private medical insurance broker Chase Templeton from Palatine Private Equity. Nevada Investments is the investment vehicle set up by the owners of Towergate, Highbridge and Madison Dearborn Partners. Arden Partners, the provider of stockbroking and corporate finance services, announced it intends to conduct a placing of new ordinary shares to raise up to £5m.
Lending
In the banking market, Barclays announced that it had agreed to sell c. 286m shares in Barclays Africa Group, raising aggregate gross sale proceeds of c. £2.2bn, following which the Barclays group will have a residual shareholding of c. 15%; funds managed and advised by J.C. Flowers & Co. sold 25m shares in OneSavings Bank, representing c. 10% of the share capital in the company, for a gross consideration of c. £110m; and Shawbrook Group announced that it had acquired a £53m portfolio of first charge complex mortgages from a specialist mortgage lender. In addition, Close Brothers Group announced the acquisition of Novitas Loans, a leading provider of working capital for law firms and also loans to their clients purchasing specific legal services.
1pm announced a placing and open offer for up to £13.0m, through the issue of up to c. 28.9m new ordinary shares. The proceeds of the fundraising will be used in part to satisfy the cash consideration for the purchase of Tracx Finance, the company that wholly owns Gener8 Finance, an invoice finance provider to SMEs for £5.25m, payable in cash upon completion. The remaining net proceeds will be used in part to finance the initial consideration for a further possible acquisition in the invoice finance sector for which heads of agreement had been reached: the consideration is expected to be £9.0m in total, of which £4.5m is expected to be paid on completion in cash, with a further £2.0m due partly in the form of loan notes or cash over a three year period and £2.5m due in the form of an issue of ordinary shares based on a three year earn-out conditional on achieving financial performance targets.
Elsewhere, Cabot Credit Management acquired 100% of the share capital of Orbit Debt Collections, a servicing business focused within the utility sector. RateSetter announced the acquisition of two specialist motor finance businesses as the platform widens its direct lending distribution network: Vehicle Credit finances vehicle purchases for consumers and Vehicle Stocking provides stocking loans to car dealerships.
FinTech
Trading technology was active in May. London Stock Exchange Group (LSEG) acquired The Yield Book and Citi Fixed Income Indices from Citi, including the World Government Bond Index, for a total cash consideration of $685m (£535m) subject to customary adjustments to complement LSEG’s Information Services data and analytics offering. BC Partners-backed digital B2B media company Mergermarket Group acquired TIM Group, the supplier of electronic distribution of trade ideas and investment recommendations, to build its equity technology and analytics capability. Cinnober Financial Technology acquired the business and assets of Ancoa Software, the UK-based market surveillance specialist company for exchanges, regulators, buy and sell-side firms. Liquidnet, the global institutional trading network, acquired OTAS Technologies, the market intelligence analytics platform for institutional traders and portfolio managers and Algomi, the network company providing information-matching solutions for the optimisation of fixed income liquidity, acquired AllianceBernstein’s ALFA (Automated Liquidity Filtering & Analytics) business.
In Paytech, NIBC Bank acquired a strategic stake in corporate cross-border (FX) payments and growth lending business Ebury, alongside existing investors Vitruvian, 83North and Angel CoFund. Valitor, the FinTech banking services provider acquired International Payment Services (IPS), the secure payment solutions provider, to consolidate IPS’s technology into Valitor’s online, mobile and point of sale payment company AltaPay. The Moneycorp Group acquired corporate international payments business Commonwealth Foreign Exchange to further support customer acquisition and international expansion. CHAPS Clearing Company, the UK’s same day high-value payment system, announced a new clearing bank; ClearBank, as a shareholder. Flywire, a provider of international payment solutions, acquired PACE Invoice, a multi-currency invoicing platform provider and direct participant in CHAPS and Money Mover, the international payments service, raised £0.5m in further funding from investors to maximise partnership opportunities in the professional services sector.
Pollen Street Capital, the private equity firm which span out from Royal Bank of Scotland in 2013, announced a merger through a share swap with MW Eaglewood, the manager of the P2P Global Investments trust, to create an entity focused on specialist lending assets with more than £2bn in assets under management with Pollen Street taking majority ownership. Also in lending, MarketInvoice, the peer- to-peer online invoice finance marketplace, signed an agreement with Banco BNI Europa, the digital-only bank, to provide £45m in funding annually to provide working capital solutions for UK businesses, online lender Zopa raised £32m from financial services group Wadhawan Global Capital and venture capital fund Northzone to fund plans to launch its own retail bank and MortgageGym, the mortgage robo- adviser, raised a £2m seed round from Gaby Salem, China Pacific Capital and early-stage technology fund Trifecta Capital.
Elsewhere, financial services technology firm FIS sold a c. 60% equity interest in Capco, specialising in business, digital and technology consulting services for the financial services industry, to private equity fund Clayton, Dubilier & Rice, receiving net cash proceeds of $477m. FIS will retain a c. 40% equity interest in the business post-completion. Neos, the smart home insurtech, secured a £5m Series A investment led by Aviva Ventures whilst also signing a partnership agreement with Munich Re to underwrite the business, InsureStreet, insurtech start-up focused on the property rental market, raised £0.5m from angel investors, KPMG International acquired Matchi, a FinTech innovation and matchmaking platform that connects financial institutions, including banks and insurance companies, with financial services technology solutions and companies worldwide and Accelerated Digital Ventures announced seed partnerships with European accelerator and pre-seed investor Ignite Accelerator.
April saw a sale by HM Government, a rejected public bid and plenty of growth capital being raised in the financial services sector. Looking closer at the transactions will reveal how active the institutional investors were, both in the private and public arenas. They took the opportunity to raise money (over £200m), invest (we estimate a total of £2.6bn) and exit investments (realising over £250m) throughout the month and across the sector.
For example, the UK Government’s Green Investment Bank was eventually privatised after a long delay in a somewhat challenging process through a sale to Macquarie and its related funds, which gave assurances of the continuing business. In another example of active (but not necessarily activist) institutional investors, the independent Board of the quoted challenger bank Shawbrook Group rejected the £825m offer from its biggest shareholder, private equity firm Pollen Street Capital, and BC Partners, another private equity group, in what might also become a protracted process.
But there were also plenty of cross-border acquisitions, both in and outbound from the UK, especially in asset management, featuring familiar names such as Schroders, Alliance Trust and Invesco. Away from the public eye was a Chinese group’s investment into the UK wealth management sector and American institutional investors back consolidation of the UK insurance broking market.
Should you wish to explore how your business could benefit from the current trends, we would be very pleased to hear from you in complete confidence
Insurance
April was a more modest month compared to March but saw Nevada Investments, the vehicle backed by HPS Investment Partners and Madison Dearborn Partners, acquire Ryan Direct Group from Ryan Specialty and Stackhouse Poland announce two transactions: E Coleman, the Poole-based marine and commercial broker and Quantum Underwriting Solutions, the Midlands-based high net worth personal lines broker.
Alan Boswell Group, the East Anglian-based insurance group, announced the acquisition of Sutcliffe Solloway & Company, a Lincolnshire-based commercial broker, bringing group GWP to £90m and employees up to 325. B.P. Marsh, the specialist private equity investor, announced the sale of its 29.94% stake in Trireme Insurance Group to the majority shareholder of the group, US Risk, valuing the Group at £9.9m.
Zurich Group completed its acquisition of the Australian travel insurance group Cover-More for A$71m. InsurTech company Trov, which provides on-demand protection via smartphones, secured $45m of additional funding from Munich Re’s investment arm and Japanese insurer Sompo, took total funds raised to $85m, having launched in the UK and Australia last year.
Investment
M&A in the asset management sector continued to be active, especially cross- border. Invesco agreed to acquire the London-based European ETF provider Source, which manages c. $25bn of assets, from Warburg Pincus and five banks. The terms of the deal were not announced. Schroders agreed to buy the Swiss- based private equity business Adveq Holdings, which has $7bn of AUM, for undisclosed terms. Alliance Trust completed the sale of Alliance Trust Investments, a specialist fund management company with c.£2.3bn AUM, to Liontrust Asset Management for not less than £25m of net proceeds.
In wealth management, Frenkel Topping, the specialist independent financial adviser and asset manager, announced that it will put itself up for sale as part of the strategy to enhance its competitive positioning. The market value of Frenkel Topping’s equity is currently around £48m. Azure Wealth was acquired by Hywin Capital, headquartered in Shanghai, China. Old Mutual Wealth Private Client Advisers acquired Infiniti while Old Mutual also disposed of its 26% stake in its Indian joint venture, Kotak Mahindra Old Mutual Life Insurance, to its joint venture partner Kotak Mahindra Bank, for £156m. Succession acquired two affiliated member firms, Paul Jones Financial Services and Equity Invest.
Elsewhere in the sector, Phoenix Equity Partners agreed the sale of Key Retirement Group, a provider of financial products for retirees, including equity release, to funds managed and/or advised by Partners Group for £208m and Embark Group agreed to acquire EBS Management from Charles Stanley for a maximum total of £4m. EBS management is a SIPP and SSAS provider with over £2bn of client assets under administration.
Lending
In the largest transaction of the month, HM Government announced that it had agreed to sell the UK Green Investment Bank to a Macquarie-led consortium, comprising Macquarie Group, Macquarie European Infrastructure Fund 5 and Universities Superannuation Scheme, for £2.3bn. In addition, ‘special share’ arrangements have been put in place to safeguard the bank’s green purpose.
Elsewhere, Phoenix Equity Partners announced that it had agreed the sale of Key Retirement Group, a provider of financial products for retirees including equity release, to funds managed and/or advised by Partners Group for £208m. Skipton Building Society announced that its subsidiaries, Amber Homeloans and North Yorkshire Mortgages, have agreed the sale of a c. £220m portfolio of mortgage loans to an affiliate of a fund managed by a global investment management firm. The portfolio is comprised of approximately 1 600 UK mortgages and the sale is designed to reduce the group’s exposure to current or recent non-performing mortgages. In the SME finance sector, 1pm announced that it had acquired the entire issued share capital of Bell Finance for up to £3.4m in cash and shares. The Funding Circle SME Income Fund announced the successful placing of shares, raising gross proceeds of £142m to purchase investments originated by Funding Circle.
In the challenger bank sector, Redwood Bank, the new UK SME business bank, announced that Warrington Borough Council acquired a 33% stake for an investment of £30m in the bank as part of its capital funding and, just following the month-end, Shawbrook Group announced that a circular had been sent to shareholders in response to the offer made by Marlin Bidco with the independent directors concluding that they were not able to recommend the offer.
FinTech
In investment technology, portfolio analysis provider Statpro acquired UBS Delta, the buyside risk and performance analytics toolbox for £11m, extending Statpro’s expertise in this area from middle office to front office. On-demand platform for savings solutions Singapore Life raised $50 million in a Series A funding from Credit China FinTech Holdings and private equity investment firm IPGL and Virtus Partners, the technology-enabled solutions provider for alternative asset managers, completed the acquisition of the fund management software firm Alphakinetic’s business and assets including trade order management, credit analysis and risk management capabilities.
Personal savings app Oval Money raised €1.2m in funding backed by Italy’s Gruppo Intesa SanPaolo, b-ventures, an incubator from DOCOMO Digital, and Bertoldi Group Family Office, crowd-trading platform company Huddlestock acquired the intellectual property of Islero, an investment analysis platform. Holiday Crowd, the holiday property investment platform / service, secured seed funding of £290k from Apadmi Ventures and Lifescale, the consumer risk management platform, received an undisclosed angel investment from Sungard’s former CEO.
In employee benefits, HR and benefits platform provider Hibob raised $17.5m in a Series A round of funding led by Battery Ventures, with participation from Eight Roads Ventures, Arbor Ventures, and Bessemer Venture Partners. Neyber, the provider of financial employee benefits, secured £7.5m in Series B funding from investors led by Police Mutual.
In payments, payment solutions provider Tuxedo Money Solutions was acquired by Aldridge EDC Specialty Finance Partners, Investoo Group, the FX trading affiliate, acquired Invezz.com, the financial news site and peer review marketplace for CFDs, forex, shares, as well as also acquiring 100ForexBrokers.com.. Payments router AccessPay secured £2m debt financing from Clydesdale and Yorkshire Bank and Blue Star Capital bought 1,471 shares in nanopayment transaction processor SatoshiPay at a price of €340 per share.
In lending technology, Redwood Bank, the new UK SME business bank announced that Warrington Borough Council acquired a 33% stake and approved an investment of £30m in Redwood as part of its capital funding. Online funding platform Fleximize received £16.3m in debt funding from Hadrian’s Wall Investments, open banking platform Token raised $15.7 million in a Series A funding from investors including Octopus Ventures, EQT Ventures and OP Financial Group. The founding shareholders have sold Angel Capital Group, which owns early-stage technology backer London Business Angels, to state-owned start-up advisory and loans provider Newable.
Elsewhere, AnaCap Financial Partners, the financial services private equity firm, acquired Ellisphere, a business intelligence company, P2 Consulting, a management consultancy backed by Lonsdale Capital Partners, has bolted on financial crime specialist FS101. Delta Capita, the financial services business and technology consulting firm, acquired Appendium technology to support the development of its securities finance managed service proposition and Disruptive Capital Finance invested £8m in Regulatory Efficiency Gains, an online platform providing due-diligence-related data processing for the insurance sector.
March saw transaction values and volumes in financial services rise, bringing the first quarter of this year close to the last quarter of 2016 on both measures. Against the backdrop of favourable equity markets, private equity funds took the opportunity to place parts of their holdings in publicly listed companies, including several challenger banks, totalling in excess of £350m of realisations. But this was outweighed by a factor of three by well over £1bn being invested by them in fast-growing new businesses in a combination of growth financings and a bid for a public company, the latter of which was jointly presented by a fund that had originally backed the company and exited the investment in connection with the IPO.
The consolidation of certain sectors was also noticeable, most strongly manifested in the agreed £11bn merger of Standard Life and Aberdeen Asset Management, raising speculation about other imminent mergers in the asset management space. Away from the public arena and at the smaller end of the scale, the general insurance broking and IFA sectors were the most active in this regard.
Thus, in the month when the formal Brexit letter was delivered to the European Council, M&A confidence remained high and funding for growth businesses was readily available in the UK. The industrial logic driving the consolidation of certain sectors and the strategic forces behind the investments in the next generation of financial service businesses have prevailed and continued into April.
Should you wish to explore how your business could benefit from the current trends, we would be very pleased to hear from you in complete confidence.
Insurance
March sprang into action with a series of material transactions. Early in the month Travelers, the US-based insurance group, acquired Simply Business, the online SME commercial insurance platform, for around £400m, from Aquiline Capital who sold it for more than three times the money it invested 10 months ago, and JC Flowers, the private investment firm, acquired UK General, the UK commercial MGA, from Primary Group. Later in the month CFC Underwriting, an MGA, completed a management buy-out of the business backed by Vitruvian and Hannover Re, the German reinsurance group, acquired Lloyd’s managing agent Argenta, securing direct involvement in the Lloyd’s market with Syndicate 2121.
Other transactions included Clear Insurance Group, the London-based commercial broker, acquiring MPW Insurance Brokers, a Kent-based commercial broker, Aston Scott, the PE-backed commercial broker, acquired A.H. Bell & Co, a Derby-based commercial broker. Academy, the Reading-based commercial broker, acquired Midlands-based Glynwood Insurance Services, extending its geographic reach, Seventeen Group, the London head office based-commercial broking group, also increased its presence in the borders with the acquisition of Westcott Insurance Brokers in Dumfries and Invicta is acquiring the general insurance portfolio of Priory Brokers.
Sompo Holdings has now completed its $6.3bn acquisition of Endurance Speciality, the Bermudan-based commercial insurance and reinsurance business, and will integrate it into the group as Sompo International.
Investment
Standard Life and Aberdeen Asset Management announced that they had reached a recommended all-share £11bn merger deal which would create “a formidable player in the active asset management industry globally” running over £660bn of assets. Under the terms of the merger, the shareholders of Standard Life and Aberdeen Asset Management will end up owning 66.7% and 33.3% of the combined group, respectively.
Old Mutual agreed to sell a stake worth £356m in its US asset management business to HNA Capital, a Chinese-owned company, which is expected to help pave the way for a flotation of Old Mutual Wealth. In a similar move, it was reported that Aviva is exploring a sale of its Friends Provident International unit, which provides life assurance and investment products, in a deal that is expected to raise between $500m and $700m.
Following the warm reception that the stock market gave Xafinity on its listing on the Main Market of the London Stock Exchange in February, which raised £46.0m for the company and £125.1m for its selling shareholders, including CBPE, and valued the business at a total of £190.3m, two listed wealth managers tapped the stock market for more capital to help finance further acquisitions of businesses: AFH Financial Group and Harwood Wealth raised £10m each which allowed their management teams to sell down some of their holdings in the wake of strong demand. In a similar vein of favourable stock market demand, private equity funds Cinven and Permira offloaded a combined 10.2% stake in JRP Group for a total of £123.5m, leaving the funds with 15.5% and 23.2% stakes, respectively, and K3 Capital Group, a provider of corporate finance and brokerage services, announced that it is seeking an admission to the AIM list of the London Stock Exchange.
Atlas Merchant Capital, the US investment firm created by the former Barclays chief executive, Bob Diamond, announced its intention to make an offer for Panmure Gordon, together with QInvest, the investment vehicle controlled by the Qatari royal family which already holds 43% of the mid-market investment bank, valuing it at £15.5m.
Elsewhere in the asset management space Dalton Strategic Partnership acquired MSK Capital Partners, a global equities fund manager with £184m of AUM and, in the wealth management sector, Succession acquired member firms Chamber Group, trading as Lewis Chambers, and Plan4Wealth in a deal that values the businesses at more than £10m. Progeny Group, which provides a combination of wealth management and legal advice, agreed to buy Quadrant Group and Fairstone Group acquired minority stakes in Mortgage Find, Campbell Harrison and Pensions & Wealth Management Services.
Other deals in the sector included C. Hoare & Co.’s sale of its investment dealing and custody platform to Canaccord Genuity Wealth Management, Embark Group, the owner of Rowanmoor and Hornbuckle, purchase of the discretionary fund management research business Discus and International Medical Group, a US-based provider of health insurance, acquisition of A La Carte Healthcare, a Sussex- based provider of medical insurance.
Lending
The month concluded with two high-profile announcements: Firstly, UK Asset Resolution announced that Bradford & Bingley had agreed to sell two separate asset portfolios comprising performing buy to let loans for £11.8bn to Prudential and to funds managed by Blackstone; and secondly, the board of Marlin Bidco, a company jointly owned by funds managed or advised by Pollen Street Capital and funds advised by BC Partners announced a cash offer to acquire Shawbrook Group for c. £842m.
There was further equity capital markets activity in the banking market with a number of share placings: Funds managed and advised by J.C. Flowers & Co. sold 24.3m shares in OneSavings Bank, representing c. 10% of its share capital, for gross proceeds of c. £96m; AnaCap Financial Partners sold 51.7m shares in Aldermore Group for gross proceeds of c. £113.7m following which AnaCap funds will be interested in c. 25% of its ordinary share capital; and Private & Commercial Finance Group announced that 40.0m new shares had been conditionally placed for gross proceeds of £10m, representing 23.5% of the existing share capital of the company.
Elsewhere, HSBC Holdings announced the completion of the sale of two portfolios of predominantly US first lien and second lien residential mortgages for c. $3.4bn and for c. $1.5bn respectively. GLI Finance announced the completion of the secondary placing of its total holding in The SME Loan Fund for gross proceeds of £22.7m. 1PM announced the acquisition of Intelligent Financing, trading as Intelligent Loans, a brokerage engaged in the packaging of secured bridging loans, second charge loans and commercial mortgages, for up to £2m.
FinTech
Insurance technology was busy in March. The Travelers Companies acquired Simply Business from Aquiline Capital Partners for an enterprise value of approximately £400m, including the repayment of debt and other obligations at closing. Telematics technology provider The Floow received a £13m equity investment to accelerate global growth from China-based investment group Fosun, with investors United Electronics Co, and Direct Line Group also involved in the transaction. CPP Group, the international provider of life assistance products, acquired Blink Innovation, the insurtech start-up targeting the travel insurance space, for an initial consideration of €1m plus additional compensation of up to €20m based on future product development.
In investment technology, DST Systems, the strategic advisory, technology, and operations outsourcing company, announced the acquisition of State Street’s ownership interest in the Boston Financial Data Services and International Financial Data Services Limited joint ventures. CBPE Capital invested in Xceptor, the process automation and data management business, alongside the existing management team, having acquired a majority stake from SVG Capital. FeedStock, the intelligent information management platform, announced a strategic investment from Illuminate Financial Management and Broadridge Financial Solutions acquired Message Automation to expand its regulatory and compliance capabilities for capital markets firms and investment managers and savings app Squirrel raised £585,000 in a crowdfunding campaign from 70 investors, all through crowdfunding platform SyndicateRoom.
The payments sector was also active in March. Currency Cloud, cross border multi- currency payment transfers platform, raised £20.0m in a late stage funding round led by new investor GV with support from existing investors Anthemis, Notion Capital, Rakuten and Sapphire Ventures. The funds will be used to fuel the company’s continued growth and ongoing global expansion. Revolut announced an upcoming £4m crowdfunding round, Apis Growth acquired a non-controlling minority stake in Trans-Fast Remittance, the global payments company, to facilitate its expansion into Africa and Asia while Loyalzoo, the digital loyalty card service for small businesses, received a second investment by a member of Wild Blue Cohort, the angel investor network. Finally, business-to-business payment solutions provider and virtual card specialist Optal announced the acquisition of automated payments company Invapay.
Elsewhere, The European Commission has officially blocked the proposed merger between the London Stock Exchange and Deutsche Börse, citing competition concerns. Numerix, the risk technology business, acquired TFG Financial Systems, the real-time risk, P&L and position management system, Freetrade the stock market trading platform secured £1.1m through its second equity crowdfunding campaign on Crowdcube. Financial data analytics firm Quantexa raised £3.3m in Series A fundraising led by Albion Ventures and HSBC, RavenPack, the hedge fund big data analytics platform, secured $5m backing from Draper Esprit and consumer finance fintech business Quint Group secured £10m from Tosca Debt Capital to fund its recapitalisation also enabling the CEO to increase his stake to 90%.
We are witnessing a gradual but very profound change in the UK financial services industry where established participants are now focusing primarily on cost savings and capital preservation as seen in recent insurance company transactions, the continued pressure on banks and prominently in the recently announced (post month end) £11bn merger between Standard Life and Aberdeen Asset Management.
This contrasts sharply with the wave of new ventures that are aptly utilising new technology and data, attracting growth capital and seemingly forging forwards. Is it the legacy that many of the traditional players carry which causes material inertia that the new generation of businesses are able to exploit and investors are recognising through their support?
No doubt these investors will look for an exit in due course. This could be offered by the incumbent groups as a route to break with their legacy, although successful new businesses are looking to raise sufficient long-term capital to potentially side-line the present competition and significantly change the landscape as we know it.
This featured in the proposed public bid for the challenger bank Shawbrook Bank just after the end of February from a consortium including its largest shareholder, Pollen Street Capital. Shawbrook’s flotation on the Stock Exchange in April 2015 was in itself part of the exit for Pollen Street Capital which had backed Shawbrook since it was first set up. The public markets clearly had a different perception of value than the long-term supporters, highlighting the fact that both established participants and private equity houses remain key to realising an exit and building long term shareholder value in the industry.
We are actively advising both established financial services players as well as the new ventures and would be pleased to hear from you to discuss your strategic options.
Insurance
Transaction volumes picked up in February with the most significant announcement being RSA agreeing to dispose of £834m of its UK legacy insurance liabilities to Bermuda-based Enstar Group which it expects will boost its Solvency II coverage by 17-20 points. Towergate raised £40m from the issue of shares to Madison Dearborn Partners, raising their stake to 25.63% and R&Q conditionally raised £16.9m, also through a share placing with institutional shareholders and directors.
A number of acquisitions were completed in the month, including Global Risk Partners acquiring Higos Insurance, with 20 offices in the South West and in excess of £50m GWP and Clear Insurance Group acquiring MPW, a Kent-based specialist commercial broker with more than 30 staff. James Hallam acquired specialist commercial broker Motor Race Consultants Insurance Services based in Dorking, Finch (part of Broker Network) acquired County Insurance Services, its second acquisition this year, and Manchester-based Principal Insurance acquired the 7,000 motorcycle policy book from Rampdale Insurance Brokers.
In London, CBC UK Limited, a retail and wholesale Lloyd’s broker, completed a management buyout for £4m, funded by B.P. Marsh with Andrew Wallas also acquiring a 15% stake and joining as chairman. Lloyd’s insurer Beazley acquired Creechurch Underwriters, with its 30-strong team based in Canada.
Homeserve, the provider of insured repair solutions, acquired a 35% stake in Vetted Limited, trading as Checkatrade, and a 70% stake in Habitissimo SL, both of them online providers of repair solutions based in Chichester and Spain, respectively, for a combined £37m. Private equity firm Inflexion completed the £40m buyout of MyPolicy, the telematics insurance broker and Verisk Analytics Inc, based in New Jersey acquired Healix International, based in Esher and the provider of healthcare insurance and risk management solutions.
Investment
Alliance Trust’s shareholders approved the board’s proposals to repurchase activist investor Elliott Advisors’ near 20% stake in the group, currently valued at over £600m, marking the end of a campaign that forced Alliance Trust to reform its business.
Life Company Consolidation Group (LCCG) announced that it had signed an agreement with Reliance Mutual Insurance Society (Reliance Mutual) under which it is proposed that Reliance Mutual will be demutualised and all of its business transferred to LCCG. Reliance Mutual has 200,000 policies and manages £1.9bn of assets.
Mattioli Woods acquired a 49% stake in Amati Global Investors for £3.33m in a mixture of cash and shares and entered into an option agreement with the seller to acquire the remaining 51% in two years. Amati Global Investors is a fund manager focusing on small and medium-sized companies with c. £120m AUM.
The London-headquartered international risk management, insurance and reinsurance broker, and human resources solutions group, Aon, announced that they had entered into an agreement to sell their Employee Benefits Outsourcing business, the largest benefits administration platform in the US, to private equity funds affiliated with the Blackstone Group for up to US$4.8bn, including US$4.3bn (£3.8bn) at closing and additional consideration of up to US$500m based on future performance.
Further consolidation took place among the financial advice networks with Intrinsic, owned by Old Mutual, agreeing to acquire Caerus Capital Group, which provides services to over 300 financial advisers with £4bn of client assets and, elsewhere in the IFA sector, AFH Financial bought Bay Financial Management and the assets of Taylor Frost Wealth Management.
Lending
In a quiet month for M&A, it was once again the high-street banks who captured the headlines. The Co-operative Bank announced that it was commencing a sale process alongside considering other options to build capital and meet the longer-term capital requirements applicable to all UK banks. The Royal Bank of Scotland Group announced that it had agreed with HM Treasury that a formal amendment will be sought to its State Aid commitments that will allow it to replace the divestment of Williams & Glyn with a package of remedies to promote competition in the SME banking market. Accordingly, CYBG announced that it had withdrawn its preliminary non-binding proposal for, and ceased discussions relating to, the Williams & Glyn operations.
Two challenger banks were also active: Atom Bank raised a further £83m in equity capital from existing major shareholders including BBVA, Woodford Investment Management and Toscafund Asset Management; and Monzo agreed a new £19.5m investment round with Thrive Capital, Passsion Capital and Orange Digital Ventures as well as £2.5m via a crowdfunding round.
Ramsdens Holdings, the diversified financial services provider and retailer, announced the admission of its ordinary shares to trading on the AIM market of the LSE with a market capitalisation of £26.5m based on the placing price. Oxygen Finance, the early payment provider, acquired Satago, the on-demand cash flow finance solution for SMEs.
Elsewhere, GLI Finance announced that it was exploring a £22.7m secondary placing of its total shareholding in The SME Loan Fund and AnaCap Financial Partners announced the acquisition of a portfolio of Italian performing and non- performing corporate secured loans, with a gross book value of €177m, from Barclays.
FinTech
The challenger banks were active this month. Atom Bank raised a further £83m in equity capital from existing major shareholders including BBVA, Woodford Investment Management and Toscafund Asset Management. Start-up bank Monzo agreed a new £19.5m investment round with Thrive Capital, Passsion Capital and Orange Digital Ventures to fund the launch of current accounts and team additions. In addition, a further crowdfunding round of £2.5m was raised at the same valuation as the institutional investors. In payments, Prepaid Financial Services, the e-money issuer and alternative banking provider, acquired Spectre Technologies, the financial services, payments, and fintech software development company. Oxygen Finance, the early payment provider, acquired Satago, the on-demand cash flow finance solution for SMEs, to offer early payment, finance and cash flow solutions for both SMEs and large organisations. Bitcoin debit card provider Wirex raised £2.5m from the Japanese financial services group SBI Holdings, Dimebox, the online payments platform, raised €5m in a series A round from the BillPro Group, the global payment processing organisation. Venture capital firm Creandum led a €5.5m funding round for company expenses management company Pleo and Imperial FX, the money transfer firm, reported a £50m injection from an undisclosed European company.
In insurance technology, private equity firm Inflexion completed the £40m buyout of MyPolicy, the telematics insurance broker, Verisk Analytics, the data analytics provider, acquired Emergent Network Intelligence, the insurance claims technology and fraud detection solutions business and Charles Taylor InsureTech acquired a majority stake in Otak, an insurance technology platform business specialising in delegated authority solutions.
Elsewhere, Dealflo, the financial agreement automation software, announced a £10m investment round to expand product innovation and into new sectors and geographies, funded by Holtzbrinck Ventures and Frog Capital, together with existing shareholder, Notion Capital. Euronext invested $10m for a minority stake in fixed income technology provider, Algomi, which enables corporate bond traders to access Algomi’s global bond information network. Bank API platform provider TrueLayer launched its private beta following a $1.3m funding round from Connect Ventures and Graph Ventures. Online real estate investment platform BrickVest raised £2m in its latest funding round and personal financial management and savings solution, Squirrel, completed a £0.5m early-stage fundraising. Perfect Channel, the enterprise auction platform, secured £2m growth funding from Beringea to build the senior management team, launch in the U.S. and expand the development team and blockchain regtech startup, Coinfirm, announced a $700k investment from Luma Ventures.
January saw robust deal flow announced in the Financial Support Services sector being mainly driven by Seed or Series A fundraising for FinTech ventures, but also by a number of strategic acquisitions. Payments remained the most active part of the sector where a number of innovative start-ups successfully attracted substantial investments from a range of domestic and international funds. We sense the “tectonic plates” shifting here as the legacy infrastructure is being eroded by new ventures supported by visionary investors.
Similarly, in the Insurance sector, private equity funds were active, both directly and indirectly via their investee companies, accounting for most of the volume of transactions.
If you are considering raising capital or realising value for your shareholders we would be delighted to speak with you.
Insurance
January was a relatively quiet month but that did not stop PIB from closing two deals, taking its record up to eight acquisitions so far. The most recent being the acquisition of TFP Schemes, a specialist provider of cover to taxis, chauffeured vehicles and other specialist markets and the other being the acquisition of DE Ford, a commercial broker with specialties in religious, charity and care sectors. At the end of the month the management of Davies Group, the claims management services group, completed a secondary buyout with backing from HGGC, a Californian mid- market private equity firm, exiting Electra Private Equity who received £45m.
Inflexion were in action, backing the buyout of My Policy for £40m. Finch, part of The Broker Network, made two small acquisitions, Citymain Insurance Services in North Hampshire and County Insurance Services in Kidlington.
In InsureTech broker Bought by Many raised £7.5m in additional funding from Munich Re’s Digital Partners business unit and Octopus Ventures.
Investment
All activity in the Investment sector in January was concentrated in the wealth management space: Quilter Cheviot, part of Old Mutual Wealth, agreed to acquire Attivo Investment Management with £300m of AUM and Bellpenny exchanged contracts on the acquisition of EFG Independent Financial Advisers.
AFH Financial Group was particularly busy, acquiring Aberdeen Wealth Management, Shield Direct and Taylor Frost Wealth Management. Newell Palmer completed the purchase of A.I.P. Financial Consultants and Fairstone Group entered into an agreement to buy an initial minority stake in Yorkshire-based Lofthouse Gate.
Lending
The leasing markets were active in January: HgCapital announced the sale of Zenith, the largest independent vehicle leasing business in the UK, to Bridgepoint in a transaction totalling £750m; and vehicle funding and fleet management specialist, Fleet Alliance, acquired a controlling interest in Neva Consultants.
In the consumer finance market, Morses Club announced the acquisition of Shelby Finance, a provider of online instalment loans. Ramsdens Holdings, the diversified financial services provider and retailer, announced its intention to seek admission of its shares to trading on AIM following an institutional placing which, if successful, will raise gross proceeds of c. £15.6m and give the company a market capitalisation of £26.5m based on the placing price. NorthEdge Capital will hold c. 31% of the issued share capital upon admission.
Elsewhere, Funding Circle announced it had raised a further £82m in equity capital led by Accel with participation from existing investors, including Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Rocket Internet, Sands Capital Ventures, Temasek and Union Square Ventures. Target Group announced the purchase of the operating business of Commercial First, a commercial and residential mortgage servicer. Maxxia acquired Capex Asset Finance, an independent asset finance brokerage, and Scottish Pacific Business Finance acquired trade and debtor finance business Sterling Trade Finance.
FinTech
In lending technology, Funding Circle, the peer to peer lending services provider, raised £82m led by Accel, with participation from existing Funding Circle investors, including Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Rocket Internet, Sands Capital Ventures, Temasek and Union Square Ventures. Online mortgage broker Habito closed a £5.5m Series A funding round led by Ribbit Capital and existing investor Mosaic Ventures, Trussle, the online mortgage broker, closed £4.5m in funding led by Orange Growth Capital, with participation from LocalGlobe, Zoopla and Seedcamp and home collected credit lender Morses Club acquired Shelby Finance, the online instalment loan provider.
Payments was also active. Swedish payments company Klarna acquired online payments provider BillPay in a deal understood to value the business at £60m and enabling Klarna to create Germany’s largest online payments company. Private equity firm AnaCap Financial Partners agreed to buy a controlling stake in Heidelpay, a payment services provider for online merchants, payments startup iZettle raised €60m in equity from existing investors as well as debt from VPC Specialty Lending, Victory Park Capital’s credit fund, Maven Capital Partners led a £2.7m investment in hospitality-related mobile ordering and payments platform
QikServe and bitcoin micropayments startup SatoshiPay secured £640k funded by Blue Star Capital. FairFX, the multicurrency payments service, agreed to acquire Q Money, including its associated e-money licence to enable FairFX to rationalise its cost base and create a digital banking product, for £425k to be satisfied by a mixture of cash and shares, plus up to £825k payable over the next three years payable in shares subject to performance milestones. Kashing, the payment technology platform for the hospitality sector, raised £150k in funding led by Startup Funding Club. Crossflow Payments, the alternative supply chain-based finance platform, secured a “significant investment” from Calibrate Management, to take a minority stake. Seedcamp is understood to have sold part of its stake in money transfer firm Transferwise whilst Andreesen Horowitz is reported to have increased its own stake in Transferwise and Kwikpay, the app for prepaid services, secured a £150k funding target.
In trading technology, BrokerTec, NEX Group’s global electronic fixed income trading platform, acquired a controlling stake in e-MID SIM SpA, the electronic central limit order book platform, The Japan Exchange Group, the merged Tokyo and Osaka stock exchanges, paid $1m for a minority stake in risk management and analytics software provider OpenGamma and BT acquired IP Trade, the trading floor communications and collaboration solutions business.
In insurance technology, hourly online car insurance start-up Cuvva raised £1.5m in seed funding from venture capital fund Localglobe, data analytics provider Verisk Analytics acquired Arium, the liability risk modelling and decision support business for the casualty (insurance) market and social media and search data insurance technology start-up Bought By Many closed a £7.5m Series A round led by Octopus Ventures with backing from Munich Re.
Elsewhere, wealth manager and stockbroker software business Babel Systems was acquired by the digital platform for financial services business InvestCloud for $20m. Artificial Intelligence powered personal finance platform Cleo raised $700k from high net worth investors. Information services provider Thomson Reuters acquired Avox, a leading supplier of legal entity data, hierarchies and identifiers on financial entities, Crowdsurfer, the crowd finance data and intelligence service, raised £1m with angel investors and Equiniti, the technology outsourcer and administration services business, acquired data analytics and cyber security business Marketing Source and loan brokerage firm Gateway2Finance.
