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The New Year is of course a time to look forward, but rather than attempting to prognosticate what 2020 might hold for UK M&A, we thought it would be worthwhile reflecting on what happened in 2019 and the implications this may have for the year ahead.

As we have been saying for some months now, levels of M&A activity across the Insurance and Investment sectors on which we focus have been showing some recent signs of beginning to slow during 2019. We now have the full year statistics to begin to quantify this.

IMAS analyses every M&A transaction in UK financial services with a deal value of more than £5 million.  In 2019 there were 54 relevant transactions in the Insurance sector, down from 64 in the previous year (-16% YoY). The corresponding figures in the Investment sector were 44 deals in 2019, against 40 in 2018 (+10%), as consolidation among wealth/IFA businesses in particular continued apace. In the Lending sector there were only 9 relevant transactions announced in 2019, down from 21 in 2018.

We also look at FinTech and Support Services, where there were 145 deals valued at more than £5m in 2019, against 131 in 2018 (+10%) but these figures include a large number of minority and fundraising transactions and reflect the continuing need for growth capital among early stage FinTech businesses and the corresponding (for now) appetite among venture investors for such investments.

Beyond the headline figures on numbers of deals, what is much more pertinent for both buyers and sellers is the detail and relevant features behind these transactions. Who was buying and why? Which subsectors are most (and least) active? Where has pricing been going? This is too much to cover in this newsletter, but IMAS will be continuing to analyse the figures over the coming weeks and sharing more detailed and targeted views with those readers to whom we think it might be most relevant.

If you would like to receive such information, understand the deals behind the numbers or discuss a bit more of the detail and what it might mean for your own plans as either a buyer or a seller in 2020 or beyond, we would be delighted to hear from you.

Wishing you a Happy New Year and the very best for 2020.

Insurance

As one might expect in a month that saw both a general election and people breaking for the festive period, sector M&A activity was relatively muted as 2019 came to a close with full year volumes of Insurance M&A down substantially on 2018. Announced M&A activity was solely on the distribution side of the market, with no insurer, MGA or Insurance Services transactions of note during the month.

Among the broking consolidators, GRP-owned Country & Commercial Insurance Brokers (CCIB) announced that it would acquire Barpax Associates, a Worcester-based agricultural specialist, Ethos-owned Saffron Insurance acquired Cambridgeshire-based Broker Network member Stuart & Co and Ethos directly acquired Hugh J Boswell, a Norfolk-based commercial broker that will become its tenth regional hub. PIB Group announced three acquisitions during the month, acquiring bad debtor protection specialist CMR Insurance Services, health & safety consultancy Sue Smith Ltd and Cooper Solutions, a specialist provider to the automotive retail industry with a portfolio of products that includes a daily rate insurance product to cover courtesy and demonstrator vehicles, provided in conjunction with PIB stablemate Cooke & Mason.

Among privately held brokers, C&C Insurance Brokers took control of Morris Biscomb & Co (trading as M&C Risk Solutions) and Scottish broker Greenwood Moreland acquired Tain-based J Moore & Co, a fellow Broker Network member.

In insurance technology, short term car insurer Cuvva announced that it had raised £15m in a series A funding round that included venture funds led by RTP Global, Breega and Digital Horizon, as well as existing venture investors and a number of angels, including Dominic Burke (JLT).

Lastly, in addition to the UK deals above, there were two notable Irish transactions. US private equity firms Madison Dearbron Partners and HPS Investment Partners, owners of the Ardonagh Group, were reported to have acquired a controlling interest in leading Irish Lloyd’s broker Arachas Corporate Brokers for €250m from Sovereign Capital Partners and Aston Lark made its second Irish acquisition of 2019 with the purchase of Wright Insurance Brokers, a specialist commercial and transport broker.

Investment

Further consolidation in the life sector took place with SwissRe announcing that it, along with the minority shareholder MS&AD Insurance Group Holdings, had agreed to sell its subsidiary ReAssure Group to Phoenix Group for a total of £3.25bn in a combination of £1.2bn in cash and the balance in Phoenix Group shares.

Sun Life Financial, the Canadian international provider of insurance, wealth and asset management services, announced that it had agreed to acquire an 80% interest in InfraRed Capital Partners, an international infrastructure and real estate investment manager headquartered in London, managing some £9.2bn in assets, for consideration that includes a closing payment of £300m.

In the wealth management sector, Hurst Point Capital, a vehicle backed by the international private equity fund The Carlyle Group, made a recommended offer for Harwood Wealth Management Group, valuing the entire issued share capital of Harwood at £90.7m. Waverton Investment Management acquired London-based Timothy James & Partners, which manages £1.1bn in funds. Mattioli Woods agreed to acquire Glasgow-based The Turris Partnership, which has over £65m of assets under advice, for up to £1.6m and Addidi Wealth joined Progeny.

Elsewhere in the sector the private equity fund Phoenix Equity Partners invested in Redington, the independent institutional investment consultant with assets under consulting of over £500bn. MJ Hudson, the asset management consultancy, raised £31.4m from new and existing investors through an AIM-listed IPO at an initial market cap of £97.6m to develop its Business Outsourcing, Advisory and Data & Analytics divisions. ABAKA, the digital retirement solutions provider, completed a $6.5m Series A funding round with Thames Trust, Ace & Co and Downing Ventures to deliver new retirement solutions for its enterprise clients and accelerate its global expansion into Asia and North America.

Payments & Lending

In payments, local payments platform for merchants PPRO has sold its former issuing business unit, now called Crosscard, to investors in a transaction led by existing PPRO investor HPE Growth.  Omnio, the core banking platform, completed a €15m growth capital raise from new institutional investors, family offices and high net worth individuals with plans to upsize the round with additional institutional investors in early 2020.

Rapyd, the API platform enabling customers access financial services from payments, checkout, funds collection and fund disbursements to compliance as a service, foreign exchange, card issuing raised an additional $20m, further to the $100m recently raised in October 2019.  Digital bookkeeping platform Receipt Bank raised equity and debt in a £55m Series C funding round led by Insight Partners, alongside Augmentum FinTech and existing investors Kennet Partners and Canadian Imperial Bank of Commerce.

Nationwide Building Society’s £50m venture fund invested to take an undisclosed stake in app-based donations startup Percent, open banking platform provider Token.io span out the newly formed M10 Networks, which is focused on building bank-grade digital money solutions and Upvest, which helps companies tokenize financial assets on blockchain, raised €7m in Series A funding led by Notion Capital, with participation from Partech Ventures and Holtzbrinck Ventures.

The Luxembourg Stock Exchange has acquired a ten percent stake in London-based bond workflow outfit Origin, Portify the gig economy worker income smoothing service, raised £7m Series A funding led by Redalpine with existing investors Kindred and Entrepreneur First. Investment bank HSBC joined a $22m Series C funding round in financial markets operating system specialist OpenFin, that will be used to explore new products and expand its offering into Asian markets. HSBC joins other investors including Barclays, CME Group, DRW, JP Morgan and Wells Fargo.

In the month where the UK general election dominated, there was limited M&A activity in the lending markets. The Bank of England announced the results of its 2019 stress test of the UK banking system, highlighting banks’ ability to withstand a severe economic shock while continuing to meet credit demand from UK households and businesses.

In a significant transaction, Arrow Global Group announced a €838m fund raising for its inaugural pan-European non-performing loan fund as part of the company’s strategy to transform the business to a more capital-light model through the build-out of its fund management capabilities. Arrow Global is targeting a total of €2bn AUM before the end of 2020 with the company investing either 24.9% of the final commitment made to the Fund or €500m as a co-investor.

Elsewhere, the payday loan sector continued to see casualties with MMP Financial, trading as My Money Partner and Swift Sterling, being placed into administration.

How long will it take to sell my business?

We are frequently asked how long a sale process will take and most clients are surprised by the answer.  As a general principle rushing things tends to lead to compromise and/or missing items as it means that there is less preparation and review time available to the vendor and their advisers.

A sales process for a business valued at up to £100m broadly breaks down into three phases. Phase one is the preparation and all processes benefit from proper preparation, especially of the business’ documentation and financials, both historical analysis and forecasts, and we would usually expect this to last three months but much depends on the client.

The second phase is the marketing and receiving of offers. This can be closely managed, with a detailed timetable set out when the information is released to interested parties. Adherence to the timetable is at the vendor’s choice but to make it work the key members of the management team have to ensure that their diaries are sufficiently open to take meetings and deal with questions. We would usually expect this phase to be two to three months, culminating in signed heads of agreement.

The third phase is due diligence and sales contract negotiation and this is primarily controlled by the successful bidder. We are finding that this phase is taking longer than it used to, is quite intrusive and can absorb significant amounts of management time. The level of detail being investigated and the requirements for financial models means that the diligence can take two to three months and the sales contract negotiations won’t start until this is substantially complete.  We now expect this phase to last four or even five months.

Each process can be tailored to the vendor’s specific requirements and circumstances.We would be pleased to discuss these with you and how we help manage your sale to reduce the burden on you.

Insurance

On the basis that the festive season invariably makes December a difficult month in which to finalise a transaction, for anyone looking to get a deal announced before the end of the calendar year November is a good month in which to do it. As it turned out, there was a large volume of Insurance M&A announced in the month, although the overall value of that M&A was relatively muted, with an absence of any landmark deals.

In broking, private equity and PE backed buyers continue to drive consolidation. Serial acquirer Global Risk Partners announced that it had agreed to buy high-end property broker Gauntlet, whose founder Harry Fitzalan Howard will remain with the business as Chairman. Pollen Street backed Specialist Risk Group, owners of Miles Smith, made its second acquisition in as many months with jewellers’ block specialist David Codling & Associates. Tasker Insurance Group acquired Worthing-based Vantage Professional Risks, specialising in the medical and healthcare sectors and market leading rent protection broker Barbon Insurance announced that they had agreed to merge with Let Alliance, creating a market leader in the provision of protection solutions and services for letting agents and landlords.

Private equity funds and businesses backed by such funds are of course not the only parties making acquisitions in the broking market and November saw a number of other buyers announcing deals. Listed Australian group PSC Insurance, who recently acquired Lloyd’s broker Paragon, made a further wholesale broking acquisition with a deal for Carroll Insurance Group. Specialist home insurance provider The Plan Group made its first acquisition with a deal to buy Kingswood Insurance Brokers, who operate the Pedal Cover Plus brand. Ticket refund protection specialist TicketPlan was acquired by phone and gadget scheme specialist Pier Insurance and taxi specialist John Paton (trading as Patons Insurance) acquired fellow taxi business Shield Insurance Consultants, which trades as Cabshield. In another interesting transaction, Radius Payment Solutions announced that it had acquired a majority stake in specialist transport broker The Burley Group. Radius is best known as the group behind the telematics and fuel card brands Kinesis and UK Fuels.

There has been a marked increase in M&A activity among underwriting agents in 2019 and November saw MGA Barbican Protect being acquired by US-based wholesale broker H.W. Kaufman, who will rebrand the business as Burns & Wilcox, and AXA XL acquiring Secure Legal Title, a Lloyd’s coverholder specialising in cover for legal risks in property transactions and with whom AXA XL already had a longstanding relationship.

In insurance technology and services, over 50s travel specialist Staysure announced it had acquired a controlling interest in Eclipse Finance Holdings, the owner of price comparison business PayingTooMuch.com and the RAC announced it had taken a strategic stake in Wrisk, with which it is trialling a mileage-based car insurance product. Listed vehicle hire business Northgate PLC also announced an all-share merger with accident management specialist Redde PLC in a combination expected to create a market-leading automotive services group and delivering c.£10 million of annual cost synergies.

Finally, it was reported that Arthur J Gallagher has agreed heads of terms on an agreement to increase its ownership interest in reinsurance broker Capsicum Re from 20% to 100%.

Investment

Brooks Macdonald, the investment manager, agreed to acquire Cornelian Asset Managers, the Edinburgh-based independent wealth and asset manager, for up to £39m, with an initial payment of £31m, of which £22m will be in cash and £9m in Brooks Macdonald shares, bringing £1.4bn of funds under management to the group.

Embark Group, the fast-growing digital retirement platform provider, agreed to acquire Zurich Retail Investment Platform and Zurich Investment Services from Zurich, the life company, adding some 130,000 clients with £11bn of assets to Embark Group. Subsequently, it was announced that Franklin Templeton agreed to buy a “material” stake in the group and Merian Chrysalis, the private equity investment trust, invested a further £12.2m in Embark Group.

Mutual Scottish Friendly completed its acquisition of part of Canada Life’s pension and life book. The deal sees Scottish Friendly assets under management increase by £2.4bn to more than £5bn, while the number of members increase by 127,000 to around 700,000.

Consolidation continued in the IFA sector: Succession Wealth acquired Hertfordshire-based Investors Planning Associates, gaining £500m of assets under advice; Fairstone Group acquired North West-based Octagon Wealth Management, adding £150m of client assets to the group; Ludlow Wealth Management acquired Southport-based Ivan A Hargreaves & Co; Apogee Wealth Management acquired Cheshire-based Premier Financial Planning; AFH Financial bought the assets of Groom Associates. Network provider Tenet purchased two existing network members, Ask Financial Management and Mansfield Financial Management, adding £25m of client assets; and Rhodes Wealth Management merged with Hale Wealth Management. Online financial adviser Open Money acquired Jargonfree Benefits, the employee benefits platform founded by Steve Bee.

Pension administrator Link Group has taken an equity stake in workplace pensions innovator, Smart Pension, as part of a strategic placement round and following the announcement of a strategic global partnership to take their combined expertise into new markets both in the UK and globally. Specialist financial services consultancy Alpha FMC announced the acquisition of financial services software business Obsidian Solutions for a reported £5.7m and B2B information provider Euromoney acquired high net worth specialist information provider Wealth-X for $20.4m.

JCRA Group, the financial risk management advisory firm, has been acquired by Chatham Financial, the financial risk management advisory and technology firm to further develop its business in Europe. ZEDRA Group, the trust, corporate and fund services specialist acquired LJ Fiduciary the private client, fund and corporate administration services business subject to local regulatory approval. VoxSmart, the mobile surveillance technology platform, announced the acquisition of Fonetic’s Trading business to enhance its communications surveillance offering for capital markets participants and smart savings app Chip has raised £7.3m from angel investors and crowdfunding by customers.

Payments & Lending

In payments, payment card technology solutions provider EML Payments announced the acquisition of white label payments and banking-as-a-service technology platform Prepaid Financial Services (PFS) for an upfront enterprise value of £226m, comprising £185m cash and £41m in EML shares, and an earn-out component of up to £55m based on three year EBITDA targets post completion.

Elavon, the global merchant acquirer and subsidiary of U.S. Bancorp acquired Sage Pay, the payments gateway and subsidiary of The Sage Group, for £232m to deepen its presence in Europe, and Equals Group, the e-banking and international payments group, acquired Casco Financial Services, a UK-based payment services provider for initial consideration of £1.7m with a potential additional consideration of £2.0m contingent on future performance.

Payments service provider Coda Payments announced a $20m funding round led by private equity asset manager Apis Partners and gold payment app Glint exited administration after its management team secured £5.7m to settle its debt two months after one of Glint’s creditors triggered its administration and later launched a hostile takeover bid.

Lending was also active. Salary advance business Hastee secured £208m equity and debt funding from Umbra Capital, IDC Ventures and others to develop its financial wellbeing solution giving workers immediate access to their earned pay.

Augmentum Fintech announced a delay to the publication of its interim accounts while P2P lender Zopa, one of its portfolio companies, explored options relating to the full launch of Zopa Bank. Zopa subsequently confirmed a £140m fundraise with IAG Silverstripe, an investment arm of IAG Capital, enabling it to meet regulatory capital requirements to lift restrictions on a banking licence albeit that this investment is still subject to final approval.

BankBI, the automated reporting and analytics software business for financial institutions including credit unions, announced a Series A investment by CMFG Ventures, the venture capital arm of CUNA Mutual Group and Uncapped, the revenue-based finance provider, raised a £10m seed round from White Star Capital, Global Founders Capital and Seedcamp to help founders raise working capital without giving up control of their business or raising debt.

Funding Xchange, the digital decisioning technology platform offering instant access to personalised transparent quotes for business funding, closed an £8m funding round, led by Downing Ventures and Gresham House Ventures, to accelerate the rollout of its white label ‘lending in a box solution’ and M∙QUBE, the fintech mortgage lender, secured £5m in growth capital led by AV8 Ventures, alongside IQ Capital and JamJar Investments to transform the UK mortgage market through partnering with selected financial institutions to issue mortgages working with mortgage brokers.

Tomorrow, the sustainable mobile banking provider, raised €8.5m led by sustainability investor ETF Partners and financial research company Limeglass announced an investment from J.P. Morgan following its recent completion of J.P. Morgan’s In-Residence Program for technology incubation.

Elsewhere, Asset Alliance Group, the commercial vehicle finance and sales company, has acquired asset finance broker Valley Finance, thereby strengthening its presence in the bus and coach sector; RM Secured Direct Lending announced that it had received commitments from investors for a total of £10m via a placing, enabling the company to address its strong pipeline of investment opportunities; and UK Asset Resolution announced the completion of its sale of NRAM residential owner-occupied mortgages and unsecured loans to Citi, originally announced in April, for a total of £4.9bn.

How much is my business worth? This is, by some margin, the question that we are most frequently asked by new clients seeking to engage an adviser to help them sell their business. Many business owners come to us and say that they have seen or heard that one business or another has recently sold for “twelve times” or “fifteen times” earnings and asking whether their own business is therefore worth the same.

Valuation is not a science and there is no right or wrong answer. Many factors feed into the price a buyer is willing and able to pay for a business. That price, divided by the relevant EBITDA for the business, will give a multiple. Such a multiple therefore is an output, not the starting point. It is a useful shorthand, derived from a thorough and holistic analysis of a company’s value to a purchaser and usually determined through a sale process involving negotiation.

There is typically no fixed valuation for a business. A business is worth what someone is willing to pay for it. Different buyers will place different values on a business and a sale process does not start with a price tag. A well-run sale process that targets the right buyers and creates (and then maintains) pricing tension is the best way for a seller to maximise value.

Quality of earnings (that is their defensibility and likelihood of them being repeated from one year to the next), risk profile, margins, return on capital, cash conversion, synergies and – crucially – growth prospects all impact on the amount a buyer will pay for a business.

If you would like to discuss the value of your own business and how you might work to maximise this in any eventual sale, whether you plan for that to happen in the near term or not for many years, we’d be delighted to hear from you.

Insurance

Perhaps not unsurprisingly in a month that had for some time been anticipated as ending with Britain’s exit from the EU, there was a notable absence of large-scale insurance M&A during October. A number of smaller deals however did get done, again demonstrating that political turmoil has had a very limited impact on domestic M&A volumes at the smaller end of the market.

In broking, acquisition-hungry consolidators backed by private equity remain active. Goldman Sachs-backed Aston Lark announced it would acquire Protean Risk, a Lloyd’s broker focused on the investment industry and Pollen Street-owned Specialist Risk Investments (SRIL) added Square Mile Broking to its portfolio, which includes both Miles Smith and the Underwriting Exchange.

A number of the consolidator-owned broking vehicles also announced new acquisitions, including GRP’s South Eastern hub Green Insurance Group acquiring Kent-based Millards Insurance Services, Verlingue-owned Finch acquiring Martinez & Partners (trading as M&P Insurance Solutions) in Hampshire and Ethos-backed Weald Insurance buying Eastbourne-based Cronin Underwood.

Several smaller brokers were also active. Buckinghamshire-based commercial broker and Brokerbility member Luker Rowe acquired Trident Insurance Brokers, South West-based PSP Group acquired nearby neighbour Paul Hicks Insurance Services, M.S. Macbeth acquired Cassey Miller James (trading as CMJ) and newly independent Noble Marine added specialist underwriting agent Yachtline.

Listed specialist private equity investor B.P. Marsh & Partners announced that it was backing newly launched Lloyd’s marine broker Lilley Plummer Risks with a £1 million minority investment and in an all-share deal Tedaisy Insurance Group and Intrinsia Insurance Group announced that they would combine under the Tedaisy umbrella, bringing together four commonly controlled trading entities (Alpha Underwriting, Practice Cover, Intrinsia Brokers and Intrinsia Claims) managing c.£25m of GWP.

Finally, it was reported that Tesco plans to take full control of its insurance business by buying out the 50.1% stake it does not already own in Tesco Underwriting from longstanding insurance partner Ageas UK.

Investment

In the asset management space, M&G completed its demerger from Prudential, with the shares of the new independent business admitted to trading on the main market of the London Stock Exchange at an initial value of c. £5.6bn. Schroders, along with several individual investors, sold their 41% and 6% holdings in RWC Partners, respectively, back to the company and to Lincoln Peak Capital, which will take a 27% stake in the business and be committed to it for the next decade. Merian Global Investors acquired Kestrel Investment Partners’ multi-asset business with £123m AUM, the first acquisition since its management buyout from Old Mutual supported by TA Associates almost two years ago. Tatton Asset Management announced its acquisition of Sinfonia Asset Management, a wholly owned subsidiary of the Tenet Group, for up to £2.7m.

Embark, the long-term savings platform provider, agreed the acquisition of Alliance Trust Savings’ advised platform and stockbroking business from interactive investor with some 30,000 clients and £6bn of assets set to migrate.

Broadstone, the fast-growing employee benefits and pensions consulting businesses, which is backed by the private equity fund Livingbridge, announced the acquisition of Bristol-based BBS Consultants & Actuaries, with some 250 clients, 130 staff and some £5bn of assets under advice. AJ Gallagher acquired Anthony Hodges Consulting, a communications consultancy specialising in pensions and employee benefits. KPMG confirmed it had entered into exclusive talks with Exponent Private Equity to sell its pensions advisory unit.

In the wealth management market, consolidator Succession Wealth gained £500m in AUM from the acquisition of Investors Planning Associates in a deal that will see 1,750 clients and 18 planners join the business, its eleventh acquisition since 2018. The Private Office bought London-based John Lamb Wealth Management and West Midlands-based Financial Advice Centre and mortgage broker Sterling Rock merged to provide a “full independent advice service” to their clients.

Investment bank Rothschild & Co announced the acquisition of Livingstone’s UK business, a UK boutique specialising in providing mid-market corporate M&A, debt and special situations advice.

Confluence Technologies, the investment data management business completed the acquisition of StatPro Group, the asset management industry portfolio analytics, asset data services and data management provider for c. £161m in cash to create front, middle and back-office solutions provider for asset managers and administrators. KB Associates, which provides management company, governance and compliance services to investment funds and asset managers secured a minority investment from ECI Partners and Freetrade, the challenger stockbroker offering commission-free investing, closed a $15m Series A funding including $7.5m from listed venture capital firm Draper Esprit plus equity crowdfunding via Crowdcube.

Payments & Lending

In payments, Banco Santander announced the acquisition of a 50.1% majority stake in Ebury, the corporate banking services provider to international SMEs, including £16.7bn in payments, for £350m of which £70m will be new primary equity to support Ebury’s plans to enter new markets in Latin America and Asia. Earlier in the month, Ebury also announced the acquisition of Frontierpay, an international payroll payments provider, to expand Ebury’s capabilities in technologies to automate international payments for SMEs.

Pollinate, the cloud-based merchant acquiring payments technology platform, closed investment from RBS, Mastercard, Motive Partners and EFM Asset Management taking Pollinate’s funding to date to £60m and Lemon Way, the payment processor for e-commerce marketplaces, secured a €25m investment from Toscafund Asset Management.

DNA Payments, a new entrant to the UK payments market, acquired CR7 Services, the fast growing, UK-based payment solutions provider, identification solutions business Paragon ID acquired Thames Technology, the card issuing platform for payment and retail card programmes and Open Banking platform Snoop, led by former Virgin Money CEO Dame Jayne-Anne Gadhia, raised £5m from Salesforce Ventures and Havisham Assets.

Omnio, the digital financial services platform, acquired MyBucks Europe, the European arm of MyBucks, the Frankfurt Stock Exchange listed fintech business offering impact loans, secured and unsecured credit, banking solutions as well as insurance products and SmartSearch, the software provider focused on Anti-Money Laundering solutions, received a growth equity investment from Marlin Equity Partners.

In lending technology, Greensill, the alternative supply chain finance supplier, secured a $655m follow-on investment from SoftBank Vision Fund for international expansion and strategic acquisitions. This funding has been raised just five months after SoftBank invested $800m and brings Greensill’s funding to more than $1.7bn in the past 14 months. The first of the acquisitions is FreeUp, which is developing early payment technology for employees’ earned wages. Tide, the digital business banking platform, announced a £44m Series B funding round led by fintech investment companies, The SBI Group and Augmentum Fintech.  Rabo Frontier Ventures also invested through an SPV managed by Anthemis Group.

Starling Bank raised £30m to fund its B2B offering and European expansion with Merian Chrysalis leading with an investment of £20m and existing investor JTC funding a further £10m, ethical pay-day loans business Savvy.co.uk secured £20m capital from Cairn Capital to increase lending capacity and digital banking platform Bnext raised a $25m Series A round, led by DN Capital, Redalpine and Speedinvest, to strengthen its European market presence and launch its services in Latin America.

Nationwide Building Society invested in auto-switching energy service, Switchd from its £50m Venturing Fund, Sheffield Haworth acquired S&H Consulting, the change management and business transformation consultancy to Tier One banks plus other financial institutions, Westpac announced it will make a minority investment in digital banking platform 10x Future Technologies and Vista Equity Partners are understood to be considering offloading a 50% stake in $10bn financial technology outfit Finastra, the merger of D+H and Misys.

OneSavings Bank and Charter Court Financial Services Group announced the completion of their recommended all-share combination, resulting in c.199.6m new OneSavings Bank shares being issued and a market capitalisation in excess of £1.5bn at the close of trading. Metro Bank announced the successful pricing of a £350m senior non-preferred debt transaction, following the issuance of which Metro Bank will meet, on a pro-forma basis, its interim MREL (minimum requirement for own funds and eligible liabilities) plus buffers of 21.5%.

Inchcape, the automotive distributor, announced that it had agreed to sell its Inchcape Fleet Solutions business, which leases fleet vehicles and provides fleet management services, to Toyota Fleet Mobility for a total cash consideration of £100m. RM Secured Direct Lending announced that it was seeking to raise additional funds of up to £10m through a new equity issuance at a premium to net asset value, given a strong pipeline of investment opportunities.

Enova International announced it intended to exit the UK market, following which CashEuroNet UK LLC, trading as QuickQuid, Pounds to Pocket and Onstride, was placed into administration.

The wealth management landscape is changing. We have previously written and spoken to our clients about the potential for new major alternative brands evolving in the market for personal financial planning and investments. With the £625m “merge-over” by Tilney of Smith & Williamson confirmed this month, a new brand the size of Brewin Dolphin and Rathbones is emerging with the potential to rival St James’s Place and Hargreaves Lansdown in the future. Add the joint venture between Schroders and Lloyds in the space and you have another competitor with deep reach across the country.

Further down the scale, M&A has driven consolidation and vertical integration at all levels with support from plenty of institutional capital being deployed to rationalise what still remains a hugely fragmented industry. The appetite among investors has also proven strong for new ventures in the space, as witnessed by the combined £46m raised by Moneyfarm and Netwealth this month, blazing the trail for increasing digital solutions in managing wealth for clients.

Changes in regulation also continue to be a strong theme influencing transaction activity. September alone saw three transactions directly driven by Open Banking, the Competition & Markets Authority initiated legislation designed to bring more competition and innovation to financial services, but most importantly Open Banking is also driving a sea change in behaviour and revenue opportunities that will have a much more lasting impact on the industry

Whatever your value creation plans are in whichever sector in financial services, we hope you will enjoy the reading and look forward to hearing from you.

Insurance

A number of notable transactions were announced in September, not least a rare public to private (“PTP”) takeover with the announcement that Jewel Bidco, a company formed on behalf of funds managed by US private equity firm Lovell Minnick Partners, had made a recommended cash offer for listed professional services group Charles Taylor plc. The offer values the business at approximately £261m and represents a 34% premium to the previous day’s share price.

In another sizeable transaction that received relatively little media coverage, Lloyd’s broker Integro Insurance Brokers, trading as Tysers, announced that it had entered into a definitive agreement to acquire Risk Transfer Group, the parent company of wholesale broker RFIB Group. RFIB had been owned by US private equity investor Calera Capital since 2015.

In broking, Ethos Broking-owned Finch Group acquired Bridle Insurance, a £10m GWP broker based in Witney. ECI-backed Clear Group made its largest acquisition to date in acquiring Alcester-based Morrison Insurance Solutions and Arthur J. Gallagher acquired Lettings & Landlord insurance specialist RGA Group, comprising three business – Rentguard, Home & Travel and RGA Underwriting.

Insurer Markel UK announced that it would acquire the online freelancer and contractor business of commercial broker Caunce O’Hara. The transaction – for a book of business comprising 27,000 customers – will bolster Markel UK’s direct business and the company has said it does not mark a shift into broking.

There was continued activity among underwriting agents, where 2019 has seen an increasing level of M&A. CPP Group announced the acquisition of ancillary product provider Business & Domestic from Motorway Direct, H.W. Kaufman Group acquired cyber specialist Node International and the aforementioned Charles Taylor, together with the Standard Club, divested their loss-making managing agency CTMA to run-off specialist Premia.

Finally, in adjusting services the Claims Consortium Group acquired Stream Claims Services. Following the transaction Stream will become Claims Consortium Adjusting.

Investment

Tilney and Smith & Williamson confirmed a merger agreement, which is expected to build a wealth management group with £45bn of assets under management when finalised in 2020 under the name of Tilney Smith & Williamson. Under the terms of the agreement, S&W’s shareholders will receive a consideration valued at £625m via a combination of cash and shares in the enlarged group. The firm’s management shareholders will be rolling the majority of their investment into the equity of the enlarged group.

Premier Asset Management and Miton Group agreed the terms of an all-share merger, which is expected to complete in the fourth quarter this year and will see Miton’s shareholders own 33% of the combined group.

Wealth management group Kingswood Holdings bought Sheffield-based WFI Financial in a deal worth up to £14m that will see its assets under management grow to £2.5bn with a client base of 5,500. WFI Financial has assets under management in excess of £550m and generated earnings before interest, tax, depreciation and amortization of £1.8m in its last financial year. Kingswood Holdings also raised £80m through an issue of irredeemable convertible preference shares to certain investors and funds managed or advised by Pollen Street Capital to help fund its pipeline of further acquisitions.

Elsewhere in the wealth management and financial planning arena, Ascot Lloyd announced the acquisitions of Stockport-based Prest Financial Planning and Bromsgrove-based QS Financial with £350m and £65m of assets under advice, respectively. AFH Financial Group acquired Mulberry Independent Financial Advisers and AE Garment Independent Financial Services for a total of £7.2m, adding £215m of client assets to the group. It also bought Wirral-based Broadleaf Financial Services for £3.2m, adding another £140m of client assets to the group. Tenet bought Edinburgh-based Forth Financial Services which will add £58m of assets under management to the network. Clifton Asset Management agreed to acquire Southsea-based firm Leonard Gold Financial Management after initially joining the Clifton Wealth Partnership as an appointed representative with a downstream purchase set to take place in two years’ time and Edinburgh-based Johnston Financial is on the verge of completing a two-year management buyout.

Among the new ventures in the Investment sector, digital wealth manager Moneyfarm raised £36m in a series C funding round led by Poste Italiane and launched a strategic partnership with the Italian postal and financial services firm. Allianz Asset Management also contributed to the funding round, having partnered with Moneyfarm to expand into the wealth management market in Germany. Another digital wealth manager, Netwealth, raised £10m in a third fundraising round led by businessman Michael Spencer, who made a £5m investment, with the balance split between a small number of new investors, as well as 75% of existing shareholders. It said the funds raised, which now equate to £26.5m, will be principally used for further investment in staff and technology.

Finally, UK’s largest insurance company, Prudential, announced that it will spin out its asset management subsidiary, M&G, to its shareholders into a separate FTSE100 company by 21st October.

FinTech

Hong Kong Exchanges and Clearing launched a surprise £29.6bn bid for the London Stock Exchange (LSE), proposing an alternative deal to the LSE’s proposed $27bn takeover of market data and analytics group Refinitiv. Two days later, the LSE Board rejected the approach citing concerns on strategy, deliverability, form of consideration and value. The LSE continues to focus on the proposed acquisition of Refinitiv with a circular expected to be posted to LSE shareholders in November 2019 to seek their approval of the transaction.

Continuing in the financial markets, JP Morgan and Société Generale invested in Wematch, as the company advances its plans to transform traditionally voice-traded financial markets, PrimaryBid, a FCA-regulated platform Pentech and Outward VC alongside Hambro Perks, Poste Italiane and Allianz Asset Management each acquired a minority stake in digital wealth management company Moneyfarm as part of a €40m Series C funding round and technology-based wealth manager Netwealth completed a £10m fundraising.

In payments, Rapyd, the digital payments platform, raised $100m led by Oak HC/FT with participation from Tiger Global, Coatue, General Catalyst, Target Global, Stripe and Entrée Capital. GC and Stripe led its previous $40m round in February 2019.  Barclays Bank, RBC Ventures, BMO Capital Partners and JPMorgan Chase participated in a C$158m funding round for iPad POS outfit TouchBistro, Spendesk, a spend management platform for SMEs, raised $38m in a Series B funding round led by Index Ventures and Fidel, the card data API startup raised a $18m Series A funding round co-led by Nyca Partners and QED Investors joined by Citi Ventures, Royal Bank of Canada and 500 Startups.

NVM Private Equity completed the management buy-out of Secure Retail, the provider of electronic payment solutions, financial services investor Apis Partners acquired a majority stake in Tutuka, the emerging markets-focussed payments processor and enabler, Augmentum Fintech led a €11m funding round for Grover, the technology rentals platform, alongside existing investors including Circularity Capital, Coparion, Samsung NEXT, Commerzbank’s Main Incubator and Varengold Bank and finally Curve, the card and account consolidation banking platform raised £6m through its first ever crowdfunding campaign.

In lending technology, Sonovate, the finance and back-office tech provider to recruitment agencies and consultancies, secured £110m debt and equity finance, led by M&G Investments, MXB Holdings, Dawn Capital and Rocket Internet SE. Make it Cheaper, a portfolio company of private equity firm ECI, acquired Think Business Finance, a fintech-based commercial lending specialist for UK SMEs and Moneybaba, the online responsible lender for emerging countries secured an investment from Duet Private Equity and EMEA Capital. Railsbank, the open banking and compliance platform, raised $10m in Series A funding led by Moneta Capital, alongside CreditEase, Clocktower Technology Ventures as well as Singapore Life and Nationwide Building Society invested in Bunk, a digital lettings agency using Open Banking to help DIY landlords, as well as Open Banking vendor BankiFi.

In insurance technology, Open GI Group invested in machine learning and artificial intelligence specialist Machine Learning Programs and will become part of Open GI as a result of the investment. Tremor, a programmatic insurance and reinsurance risk transfer marketplace, raised $10m with Anthemis Group as the lead investor with W. R. Berkley Corporation alongside previous backers Nephila Capital and Markel Corporation.

Elsewhere, cryptocurrency surveillance firm Elliptic raised $23m Series B fundraising led by Japanese financial services firm SBI Group to fund its ongoing expansion in Asia, cryptocurrency market data provider Kaiko secured €5m in a funding round led by Anthemis Group and Point Nine Capital alongside CoinShares, ConsenSys and Olymp Capital and blockchain startup Everledger raised $20m Series A funding led by Chinese investment firm Tencent, alongside Graphene Ventures and Fidelity Investments.

Lending

Lloyds Banking Group announced that Halifax, a division of its wholly-owned subsidiary Bank of Scotland, had entered into an agreement with Tesco Personal Finance to acquire Tesco Bank’s prime UK residential mortgage portfolio for c. £3.8bn, representing a 2.5 per cent. premium on gross book value. J Sainsbury also announced that Sainsbury’s Bank would immediately stop new mortgage sales, prompting speculation that it too may exit the UK mortgage market in due course.

Following the announcement that pawnbroker Albemarle & Bond had ceased trading earlier in the month, H&T Group announced that it had entered into a contract for the acquisition of 113 pledge books from Albemarle & Bond, a trading name of Speedloan Finance. The cash consideration is c. £8m.

Elsewhere, Make it Cheaper, a portfolio company of ECI, announced that it had acquired Think Business Finance, a commercial loan broker for UK SMEs;  Woodford Investment Management reported that it had sold a 19.25% stake in Non-Standard Finance to Alchemy’s Special Opportunities Fund;  and Augmentum Fintech announced that it had converted a number of convertible instruments into the equity of its portfolio company Tide, the business current account provider.

Throughout August most of the attention has been on the new Government’s activities and the M&A investment market has taken something of a backseat, more akin to its traditional holiday season role than its more recent track record.

The highs and lows of political intrigue and the country’s cricketing ability would appear to have kept many people away from the boardroom tables; deal flow has been light and mostly at a modest level.  The next two/few months will continue to test large investors’ confidence but based on experience we fully expect more modest value deal flows to remain reasonably buoyant as PE investors/serial acquirers continue to pursue their strategies and seek value from the uncertainties.  With sterling continuing to be under pressure the less risk averse overseas investors may continue to add good value in sterling-based assets.

With a number of the PE backed vehicles beginning to reach their “realisation windows”, especially in the insurance sector, the next quarter could provide an interesting insight into confidence in the UK financial services sector.

If you are thinking about how to achieve value from your existing activities or from these developments, we would be very pleased to show you how we can help you achieve those objectives.

Insurance

The month saw a number of small transactions and speculation about larger ones. Penta has now been invested in GRP for 6 years so there has been the inevitable speculation that they will now be looking to realise that investment. There was also speculation about Tysers looking to do a deal with Calera backed RFIB.

GRP continues to be active with the acquisition of risk management firm Health and Safety Click and Aston Lark acquired Buckland Harvester, a Manchester-based commercial broker, extending its regional footprint. GS Group, based in Perth, acquired local broker I & D Insurance Services, based in Alyth. Ethos-owned Finch Group has acquired CFN Insurance Services, trading as Bridle Insurance, a £10m GWP commercial broker based in Witney, Oxfordshire.

PE investor Beech Tree has made an investment in Avid Insurance, a £40m GWP Lloyd’s broker and coverholder, which specialises in the Social Housing sector, Travel and associated insurance, plus Property and Contingency insurance.

Howden Insurance Group has expanded its global business with the acquisition of Columbian employee benefits specialist Restrepo Henao, based in Medellin. SSL Endeavour has strengthened its board with the appointment of Jonathan Palmer-Brown, as Non-Executive Chairman, and Hugh Crossland, as Group CFO, and confirmed that it is finalising the acquisition of Worldlink Holdings, a US aviation brokerage and MGA.

Gallagher Basset acquired the assets of Adjusting Associates, a south Wales-based chartered loss adjuster, and Arc Legal Assistance, a subsidiary of AmTrust International, acquired Legal Insurance Management Group, an ISO 9001-certified specialist in legal expenses, professional fees, home emergency and vehicle breakdown.

Investment

ReAssure, the life assurance subsidiary of SwissRe, agreed to buy the life assurance and pensions division of Quilter for £425m, adding 200,000 customer policies and £12bn of assets to ReAssure’s platform. Elsewhere in the life sector, Legal & General bought pension tracing and consolidation business MyFutureNow which provides pensions dashboards for savers.

Tilney, the integrated wealth manager which is backed by Permira, the private equity firm, confirmed that it is in exclusive talks with Smith & Williamson, the financial and professional services firm, to create one of the larger wealth management groups in the UK with over £45bn of combined client assets under advice and management.

Also in the wealth management sector, Charles Stanley acquired, for an undisclosed sum, Leeds-based discretionary investment management firm Myddleton Croft, which, at the end of its last financial year had £96.5m funds under management. Sanlam bought a 55% stake in Cheshire-based Avidus Scott Lang,and Octopus Group, the financial services and energy investment firm, agreed to acquire Seccl Technology for £10m. Seccl Technology provides solutions for wealth managers to administer clients’ money.

In pension administration, Hartley Pensions, part of the Wilton Group, bought the book of GPC Sipp, with around £130m of assets in SIPPs and SSASs for Guardian Pension Trustees.

FinTech

The payments sector continued to be active over the summer. Payment platform Klarna raised $460m venture funding (at a $5.5bn post-money valuation) led by Dragoneer Investment Group with other investors including Commonwealth Bank of Australia, IPGL, Merian Chrysalis Investment, IVP, HMI Capital, Första AP-fonden and BlackRock whilst digital payments aggregator BharatPe raised $50m led by fintech fund Ribbit Capital and hedge fund Steadview Capital with existing investors Sequoia Capital, Beenext Capital and Insight Partners also participating.

International payments and foreign exchange specialist moneycorp acquired the Rochford Group, the Australian independent treasury advisors, retail foreign exchange business Change Group International acquired the retail arm of Swedish finance group, SVEA Ekonomi and Flatfair, the debit-card based property deposit business, raised $11m in a funding round led by Index Ventures.

Equals Group, the e-banking and international payments group, announced a Placing and Open Offer to raise up to £16m (before expenses) and also acquired the international payments business of Hermex International, part of the FXPro Group for £2m through its subsidiary, FairFX plc whilst ID card company Digital ID acquired Essentra Security, the ID card company.

SME lenders iwoca, Atom Bank, as well as payment service providers Currencycloud and Modulr Finance were each recipients of a £10m grant from the Banking Competition Remedies fund, set up in the wake of the Royal Bank of Scotland’s bailout. Each had made specific public commitments to increase “lending or payments services to SMEs”.

In lending technology, property finance marketplace LendInvest secured a £200m investment from the National Australia Bank to expand its capacity to lend in the UK buy-to-let market, Augmentum Fintech invested £5m in online mortgage broking and lending platform Habito, which is understood to be preparing for a larger Series C investment round and online debt financing platform PrestaCap (aka iBondis) was acquired by DEPObank for an undisclosed amount, providing an exit for investors Boost Heroes, Run Capital, SAF Ventures, and Shiva Vig.

In investment technology, Octopus Group, the financial services and energy firm, acquired ‘client money’ financial services technology platform Seccl Technology Limited for £10m subject to regulatory approval, personal financial management app Money Dashboard raised £4.6m on crowdfunding platform Crowdcube, comprising £3.6m with the support of 3,300 crowdfunders plus additional investment from existing backer Calculus Capital and Scottish Investment Bank and finally insurer and asset manager Legal & General acquired the pension pot consolidation dashboard business My Future Now ahead of government plans to make a pensions dashboard platform available to the general public.

Elsewhere, information services provider Experian was busy having led the US$20m first close of a Series B1 investment in CompareAsiaGroup, the Asia financial management platforms for banking / insurance products and services, and also acquired Look Who’s Charging, the bank payment information provider, through its Australia and New Zealand division. Trak Global, the telematics technology business, completed a £40m+ minority investment from Three Hills Capital Partners. Envelop Risk, the provider of specialty cyber insurance analytics and underwriting services raised strategic capital with MS Amlin as well as Summer Capital, professional services company Accenture acquired Parker Fitzgerald, a strategic advisor and consulting partner to financial institutions and ComplianceOnline, the global regulatory intelligence business, was acquired in a management buyout backed by Kester Capital.

Lending

The lending markets witnessed only a handful of UK M&A transactions.

Arbuthnot Banking Group announced that its subsidiary Arbuthnot Latham & Co. had completed the purchase of a residential mortgage portfolio, originally announced in July 2019, for a total consideration of £258.1m; Augmentum Fintech announced that it had made an investment of £5m in Habito, the on-line mortgage broking and lending platform; and Fleetondemand announced that it had acquired vehicle management company FleetEurope, which offers rental, leasing and fleet management services, for an undisclosed sum.

Elsewhere, P2P Global Investments announced that it had reached an agreement to sell the entirety of its interests in Castlehaven Finance, an alternative development and bridging finance lender in Ireland, to Avenue Capital Group. Gross proceeds from the sale were c. €250m, a modest premium to the holding value of those interests, which included a 25% equity stake along with other loan and debt interests.

Is financial services becoming more about data and analytics than people? With the London Stock Exchange’s announcement that it is acquiring data provider Refinitiv, a business that has perhaps often been (wrongly) perceived as just a platform for trading, has demonstrated that it should more properly be thought of as a group that also provides the technologies and information flows that drive trading, capable of challenging the largest data providers such as Bloomberg and IHS Markit. Harnessing the power of data is widely recognised across financial services as a key ingredient for a successful value creating strategy.

Most of our clients are already gradually transforming their operations to a greater or lesser extent into more automated, digitalised processes. These changes are often effected or accelerated via mergers and acquisitions. But, as is exemplified by LSE’s bold move, many are also considering more fundamental reforms to their business models by increasing data collection and processing in new ways that can benefit their customers, widen their service propositions and radically improve efficiency.

These changes have clearly inspired investors and helped FinTech funding reach record levels at £2.3bn so far this year. It is also bringing many of the tech giants into financial services – Apple has launched a credit card in the US and Google has bought into the UK insurance space, both as a broker and software provider. These businesses see the opportunity to exploit the value of their data and brands in financial services.

If you would like to discuss whether M&A could help realise your own objectives in this area, we would be very pleased to discuss how we might be helpful.

Insurance

July is often a quiet period for M&A as people begin to get away from the office for summer, but the last month has seen a steady flow of announced deals. For once it was not just the ‘usual suspects’ announcing deals (with the exception of the ubiquitous GRP) and a number of acquisitions were made by less active acquirers, a reminder that prospective sellers need to consider acquirers beyond just the handful of most prominent consolidators.

Early in the month the increasingly active Seventeen Group, flush with new financing, announced the acquisition of Walker Perrson & Spargo (WPS), a chartered broker based in the South West. Liverpool-based Mason Owen Financial Services announced the acquisition of Business Insurance Services(BIS) and the aforementioned GRP acquired 3XD, a Lancashire-based broker selling home, landlord and selected other products through financial intermediaries. Also among the among the PE-backed consolidators Ethos (née Broker Network)-owned Saffron Insurance announced the acquisition of Bridge Insurance Services, an Ethos network member based in Cambridgeshire.

There were two notable broking acquisitions by overseas businesses with an existing presence in the UK. In the London market, Australian firm PSC announced an agreement to acquire Paragon for £42 million and US consolidator AssuredPartners acquired Birmingham-based broker Hettle Andrews & Associates.

There was further M&A activity in the MGA space with the most active acquirer in the sector Nexus Underwriting announcing the acquisition of Plus Risk Limited (PRL), a London-based MGA founded in 2017 and focused on liability and niche PI cover.

Outside of distribution, there was also activity among insurers. German legacy acquirer DARAG made its first forays into the UK market with two transactions, acquiring both closed reinsurer One Re and The Underwriter Insurance Company, an insurer in run-off. CVC-backed warranty insurer Domestic & General announced a refinancing and the sale of a minority stake to ADIA, Abu Dhabi’s sovereign wealth fund. This transaction follows D&G’s decision to shelve its IPO plans last month. Finally, on the last day of the month Arch Capital announced its widely trailed acquisition of Lloyd’s insurer Barbican Group from Carlson Capital.

In insurance services, claims specialist Davies acquired specialist forensic investigations business GBBand collision investigation business Banwells. In a notable US claims deal, global firm Sedgwick acquired York Risk Services, another market leading US claims business.

Investment

Several fund managers were busy in M&A this month, including Liontrust which entered into a conditional share purchase agreement with Neptune Investment Management to buy the entire business, which has c. £3.6bn of assets under management, for up to £40m. BlackRock, Legg Mason and Merian Chrysalis Investment Company (formerly Old Mutual Global Investors) took a combined stake of nearly 40% in platform and pension provider Embark Group, raising some £39.4m for the group. Overseas, Schroderspurchased a majority stake in BlueOrchard Finance, a Swiss-based specialist in sustainability and emerging markets private debt and private equity investments with $3.5bn in assets under management.

Caledonia acquired an initial 37% minority stake in Stonehage Fleming, one of the largest family offices in the UK, for £92m and, just after the end of the month, Charles Stanley announced the acquisition of the Leeds-based discretionary investment manager, Myddleton Croft, which had £96.5m of assets under management at the end of its last financial year. Rothschild & Co, the independent investment bank, bought a significant minority stake in the equities research provider, Redburn.

In the IFA sector, Wren Sterling acquired Dunfermline-based TD Armstrong Financial Planning with £116m of assets under advice and Perspective Financial Group acquired Wiltshire-based Goodman Financial Planning which has £20m of assets under advice. Swansea-based Portfolio Financial Consultancy announced it is to acquire Crescent Financial, and Harwood Wealth announced it had signed heads of terms for the acquisitions of three advisory firms for a combined £1.8m. AFH Financial Group issued £15m of convertible unsecured loan stock to help finance the company’s pipeline of acquisitions.

Among the life assurers and reinsurance groups, Swiss Re suspended plans for the flotation of its UK life assurance subsidiary, ReAssure, citing weak demand from institutional investors and it was rumoured that Zurich is working with HSBC to find a buyer for Zurich Intermediary, its subsidiary investment solutions platform provider.

Elsewhere in the platform space, technology provider FNZ acquired wealth management software firm JHCand also agreed to take over its Australian-based rival, GBST, in a deal worth £150m (A$269 m), potentially allowing FNZ to strengthen its grip on the UK platform market where it provides the software used by a large number of investment platforms including Standard Life, Aviva and Zurich, while GBST provides technology for Aegon and Novia.

FinTech

London Stock Exchange (“LSE”) announced the proposed acquisition of data and analytics business Refinitiv in an all share transaction for a total enterprise value of approximately US$27bn which will result in the Refinitiv shareholders ultimately holding c.37% economic interest in LSE and less than 30% of the total voting rights of LSE. The transaction brings together two businesses to create a global financial markets infrastructure provider with a leading data and analytics business, significant capital markets capabilities across multiple asset classes as well as a broad post-trade offering in a deal combining both horizontal and vertical integration. Approval for the transaction will be sought before the end of 2019 with completion expected to occur during the second half of 2020.

Towards the end of the month, FNZ won a bidding war to acquire Australian financial technology vendor GBST for A$269m, having been subject to three-way interest from Bravura, SS&C and FNZ, with the latter eventually winning with a deal at A$3.38 per share. This represents a 94.9% premium to the closing price of the company’s shares on April 11th 2019, when Bravura made their initial approach.

In payments, mobile point-of-sale payments business SumUp announced a €330m facility from Bain Capital Credit, Goldman Sachs Private Capital, HPS Investment Partners, and TPG Sixth Street Partners. Remitly, the online international money transfer service, announcing $220m of new financing, including $135m Series E equity and $85m syndicated debt financing with the equity component led by Generation Investment Management alongside Owl Rock Capital, Princeville Global, Prudential Financial, Schroders, and Top Tier Capital Partners, alongside Remitly’s existing investors, including DN Capital, Naspers’ PayU, and Stripes Group.

Soldo, the payments and expense management solutions provider, closed a $61m Series B round led by Battery Ventures and Dawn Capital also with participation from Accel, Connect Ventures and Silicon Valley Bank and cross-border payments outfit Currencycloud is understood to have raised £32m in the first part of a Series E funding round, according to regulatory filings / TechCrunch with Goldman Sachsand existing investor GV. Money transfer platform Paysend raised £8.5m Series B fundraising including £3.95m from GVA Capital and £4.6m from 926 investors on the Seedrs investment platform lead by Plug and Play and Digital Space Ventures.

In banking and lending technology, consumer lending platform Lendable secured a £200m forward flow funding line from Goldman Sachs Private Capital to continue to fund online loans to consumers using machine learning technology. Mobile-only Atom Bank has raised £50m in a fundraising round with participation from BBVA, Toscafund, Woodford Patient Capital Trust and funds advised by Perscitus LLP, following BBVA’s decision not to exercise its option to acquire the business which we understand has been influenced by Brexit and continued resulting uncertainty on the UK economy.  Atom is in discussions with investors around a potential IPO in 2022.

Banking platform Curve secured a $55m investment led by Gauss Ventures, a specialist FinTech investment fund, alongside Chinese technology group CreditEase, early-stage investor IDC Ventures and Investec, the fund manager investing through its Outward VC fund and Temenos, the banking software company, acquired Logical Glue, the provider of a patented, “explainable” AI (XAI) platform with financial clients in the UK and Europe for £12m. Car finance marketplace platform Zuto secured £7m growth funding from existing investors Scottish Equity Partners alongside Columbia Lake Partners to invest further in its technology and customer experience. Asset finance & leasing software provider Netsol acquired the remaining 49% stake of Virtual Lease Services (VLS), a UK-based portfolio and risk management servicing partner for business and consumer finance providers. Netsol initially acquired a 51% majority stake in VLS through a joint venture partnership with Investec in 2011.

Elsewhere, mid-market private equity investor Equistone Partners acquired Moody’s Analytics Knowledge Services, the provider of bespoke research, analytics and automation technology to the financial services sector. Interestingly, Moody’s Corporation is building its institutional buy-side market capabilities with the acquisition of the UK’s RiskFirst, a provider of risk analytics technology for asset managers and pension funds with c. 3,000 pension plans and over $1tn of assets modelled on their technology. Digital Shadows, the corporate digital risks business, raised $10m in strategic Series C funding led by National Australia Bank with existing investors including Octopus Ventures also contributing to the round. GoCompare owner, GoCo Group, bought energy switching business Look After My Bills in a deal worth up to £12.5m including £6m upfront, £2.5m deferred consideration and up to a further £4m performance based earn-out, Rothschild agreed to buy a minority stake in equity research and financial services firm Redburn for an undisclosed amount and insurance software provider Acturisacquired Canadian broker software provider Zycomp Systems with presence in the Canadian and Caribbean markets for an undisclosed sum.

Lending

As the summer holiday period approaches, July witnessed a relatively quiet month in lending M&A activity.

OneSavings Bank and Charter Court Financial Services Group announced that the Competition and Markets Authority had cleared their proposed all-share combination, first announced in March. Completion of the combination remains subject to other outstanding conditions, including receipt of regulatory approvals from the FCA and PRA.

Metro Bank announced that it had executed the disposal of a previously acquired £521m mortgage portfolio to an affiliate purchaser of Cerberus Capital Management. The portfolio was primarily retail buy-to-let mortgages and is expected to generate a £1.8m loss upon completion. Atom Bank announced that it had raised £50m to fund further growth and continued investment in technology. The fundraising round comprised investors including BBVA, Toscafund, Woodford Patient Capital Trust and funds advised by Perscitus.

Elsewhere, TruFin announced the conversion of its existing £3.65m convertible loan into ordinary equity in Vertus Capital, a funding provider to the IFA sector. Together with a further cash payment of c. £355k, TruFin Holdings (a wholly-owned subsidiary) has become the 51% controlling shareholder in the company.

June marked the end of the first half of 2019 and the quarterly update to our M&A statistics for UK Financial Services (see www.imas-insight.com).

The FTSE 100 is again approaching record levels. Interest rates remain at historic lows and buyers are able to borrow money for acquisitions on very favourable terms. Private equity is bursting at the seams with committed capital that it is desperate to deploy. So why is transaction activity falling?

The easy answer would of course be ‘Brexit’. But similar Brexit uncertainties were there in H2 2018 when record deal volumes were hitting new highs. Most UK M&A is between small and mid-cap domestic businesses for whom Brexit considerations have limited day to day impact. Very few clients or prospective buyers and sellers have said to us in the past year or more that Brexit is impacting their decision making in terms of M&A activity.

Fear of a more general downturn in the business cycle? Certainly, leading indicators of economic conditions across the UK and indeed globally have begun to sound some alarm bells, but M&A activity is a lagging indicator – a typical M&A process lasts more than six months, often much longer. Most of the transactions being announced today were hatched much earlier, typically during 2018.

Years of consolidation reducing the number of available targets for M&A? the statistics do not bear that out. There are currently c.4,500 FS businesses in the UK with a value estimated at more than £5m. Five years ago there were c.3,300. For every business that is taken over, other new ones are being started and grown. This is clearly evident in FinTech, with new start-ups appearing almost daily.

The answer probably lies in a combination of factors. And despite the recent fall in volumes transactions are still happening. In insurance distribution and wealth management in particular, M&A activity remains buoyant. In FinTech, capital raising activity shows no signs of dimming. M&A conditions remain favourable for both buyers and sellers.

Insurance

In General Insurance, June was another active month for insurance broking M&A, with four of the consolidators announcing six transactions between them. Carlyle-backed PIB Group announced its 20thdeal since 2016 with the acquisition of Cobra, which includes the Cobra Network business as well as a Lloyd’s broker, retail business and MGA. Seventeen Group acquired medical malpractice and PI specialist Graybrook Insurance, with the support of new financing partner Beechbrook Capital and Tasker Insurance Group made its second acquisition of 2019 with Hobbs Associates, a Midlands-based specialist active across sectors including Technology and Life Sciences.

The other three deals all involved Global Risk Partners subsidiaries, as the acquisitive County Groupacquired two further brokers in the North-West – Meadons and Eric Rawlins & Company – and its GRP stablemate Thomas Sagar Insurances bought commercial lines broker Thomas Cook & Sons.

In a transaction for a book of business, Glasgow-based broker Blackford Insurance added c.£3m of GWP with the Edinburgh-based customer book of TL Dallas. There was also MGA deal activity as Munich Retook control of specialist underwriting agency JRP Underwriting. Munich Re subsidiary ERGO has been the lead capacity provider to JRP for several years.

Private equity investment in the broking sector continued with London market specialty lines brokerage BMS Group announcing that it had secured new investment from British Columbia Investment Management Corporation (BCI) and Preservation Capital Partners in a deal valuing BMS at £500m.

In capital markets news, gig-economy focused InsureTech company Zego raised $42m in a series B funding round led by Target Global, to fund further European expansion and Broker Network parent Bravo Group reported it had agreed a new £80m loan facility to support further acquisitions, taking its total available loan facilities to over £200m.

Lastly, there were press reports that CVC Capital Partners has shelved immediate plans for a sale or flotation of warranty insurer Domestic & General, which had been widely expected to IPO or be sold to another private equity fund later this year.

Investment

In wealth management, Standard Life Aberdeen’s national financial advice firm, 1825, agreed to acquire Grant Thornton’s wealth advice business, adding £1.7bn of assets under advice and over 100 employees. Brown Shipley agreed to acquire Cambridge-based NW Brown & Co with c. £1bn of discretionary AUM. Kingswood Holdings confirmed that it is in the process of securing “substantial” funding to support its pipeline of acquisitions, which exceeds £100m of total value. Fairstone acquired Leicester-based Bankfield Financial Advisers and Devon-based South West Financial Planning, with a combined £120m of client assets, and AFH agreed to buy Hertfordshire-based adviser AE Garment Independent Financial Services in a deal worth £1.7m.

Among the IFA networks, Quilter completed the acquisition of Lighthouse for £46.2m, adding around 400 financial advisers to its Intrinsic network and Tenet Group purchased the client assets of Preston-based Colin Galbraith Independent Services.

Elsewhere, Mattioli Woods cancelled its option to acquire the remaining 51% of the capital of Amati Global Investors that it does not already own in exchange for a payment of £0.75m. Medicash Health Benefits acquired Health@Work Consultancy Services and the newspapers reported renewed rumours about SwissRe’s and MS&AD Insurance’s plans to float ReAssure, their British life assurance subsidiary, on the London Stock Exchange after the registration document was filed with the regulators. ReAssure acquires and manages closed book life assurance policies totalling c. £45bn of assets.

FinTech

The banking and lending technology sector was particularly active in June. Monzo, the U.K.-based challenger bank raised a £113m Series F round led by Y Combinator’s “Continuity” growth fund, with other new and existing investors including Latitude, General Catalyst, Stripe, Passion Capital, Thrive, Goodwater, Accel, and Orange Digital Ventures. Chinese e-commerce platform Tencent led a $35m financing round for TrueLayer, the platform for fintechs, developers and retailers to access bank APIs and to securely share customers banking details, with other backers including the Singapore sovereign wealth fund Temasek.

NorthEdge Capital backed the MBO of Phoebus Software, which delivers software and services to enhance the origination and account servicing processes across a range of products, including residential and commercial mortgages, equity release, bridge loans, asset finance and savings while doorstep lender Morses Club acquired U Holdings, a digital current account provider, for an initial cash consideration of £5.8m plus a further up to £5m depending on performance. Augmentum Fintechannounced £8.5m follow-on investments in its portolio including £5m to banking firm Tide, Swoop, a FinTech solution that supports SMEs to access funding as well as saving and financial advice, was awarded £5m by the UK’s Banking Competition Remedies (BCR) and Celsius Network, a cryptocurrency lending and borrowing platform, acquired BSave, the platform offering interest income on cryptocurrency.

The payments sector was also active. WorldRemit, the technology company that helps expatriates and migrant workers send remittances back to their home countries, raised a $175m Series D funding round backed by venture capital firms TCV, Accel Partners and Leapfrog Investments, all of which backed WorldRemit previously, took part in the new round. Foreign exchange specialist Argentex listed on AIM at 106p raising £14m in new money with existing owners Pacific Investments Group selling down over £30m in shares, while National Grid Partners (NGP), the investment and innovation arm of National Grid plc, announced the addition of four new portfolio companies including GoCardless the cloud-based online payment platform for frictionless direct debit and recurring payments for improved customer service. PPRO, the cross-border e-payments specialist, acquired the Latin American payments provider allpago to build its global platform for local payments and The Access Group, the software provider to the UK mid-market, announced the acquisition of Eazy Collect, the payment platform providers for SMEs, not-for-profit, blue-chip corporates and the public sector.

Elsewhere, Aptitude Software Group agreed to sell its wholly-owned subsidiary, Microgen Financial Systems, for £51.0m to private equity firm Silverfleet Capital Partners reversing its previous plans to demerge and list the business on London’s AIM market, European venture capital firm Target Global led a $42m Series B funding round for InsurTech company Zego, joined by new investors including Latitude and Taavet Hinrikus, TransferWise’s founder, with existing backers Balderton Capital and DST Global’s Tom Stafford. Ideagen announced the £15.8m acquisition of Redland Business Solutions, the RegTech SaaS company that supplies regulatory and compliance software to the financial services industry and London Stock Exchange Group acquired data provider Beyond Ratings to build its Information Services business to meet a growing demand for environmental, social and governance (ESG) products.

Lending

In the consumer finance market, H&T Group announced the proposed acquisition of 65 trading stores and a further 29 pledge books from The Money Shop (the trading name for Instant Cash Loans and TM Sutton) for an initial cash consideration of c£10.6m, of which £1.75m is conditional and deferred for up to 12 months. As part of the funding, H&T Group completed a new share placing, representing c.5% of the existing share capital and raising gross proceeds of £6m. Morses Club announced that its fully owned subsidiary Shelby Finance had acquired U Holdings (trading as U Account), a digital current account provider, for an initial cash consideration of £5.8m and conditional deferred consideration of up to £5m, payable over four years. Richmond Group announced that it was investigating a potential sale of part of its c.61.4% shareholding in Amigo Holdings in a secondary placement but had opted not to proceed at this time. Richmond added that it envisaged remaining a significant shareholder in Amigo for the long term.

In the banking market, the recommended all-share combination of OneSavings Bank and Charter Court Financial Services Group was approved by both sets of shareholders. Completion of the combination remains subject to the satisfaction or waiver of the other conditions, including CMA, PRA and FCA approval. Arbuthnot Banking Group announced that its subsidiary Arbuthnot Latham had agreed the purchase of two residential mortgage portfolios from Raphael Mortgages and Magellan Homeloans for a total cash consideration of £258m. Paragon Banking Group announced the sale of its residual interest in its Paragon Mortgages (No.12) securitisation, following which it will be conducting a share buy-back of up to £30m with the balance of the capital generated being used to support balance sheet growth.  Monzoannounced a new funding round of £113m, adding Y Combinator Continuity and Latitude as new investors alongside its existing investor base.

Elsewhere, Mortgage Advice Bureau announced that it had agreed to acquire 80% of the entire issued share capital of First Mortgage Direct for an initial cash consideration of £16.5m. MAB has also entered into an option agreement to acquire the remaining 20% from Ian McGrail between 2024 and 2030, for a minimum of £4m and up to a maximum total consideration of £10m.

There was a steady flow of financial services sector M&A announced in May. Notable transactions included three separate financial services acquisitions by private equity investors, with Phoenix Equity Partners, Goldman Sachs Merchant Banking and Dunedin as well as a disposal by BC Partners and two nine digit financings led by Softbank’s Vision Fund and by Lead Edge Capital.

We have regularly discussed in this newsletter how increasing amounts of committed capital (or “dry powder”) in private equity funds have fuelled the growth of buyouts and increased valuations across many financial subsectors. This surfeit of private equity capital is a feature across small, medium and large funds. Private equity owned businesses that have been grown by one owner are regularly sold on to other, larger private equity funds in secondary buyout transactions.

One corollary of this is that for smaller private equity funds appraising a prospective target with good long term growth prospects, a strong thesis around their eventual exit is increasingly supported by the prospect of a secondary (or tertiary) exit to another private equity fund – in the absence of a synergistic trade buyer they can increasingly be confident that there will be a ‘bigger fish’ within the private equity universe to sell a business onto at the end of their investment period. This contrasts with the world of ten years ago, where exit considerations and specific trade buyers were front and centre of any investment decision. It is a trend that is allowing private equity greater flexibility to look at an increasingly broad range of possible targets, including quite specialist businesses where there may be few ‘obvious’ trade buyers.

As always, should you wish to discuss any of the themes raised here or how IMAS could help your business, in the strictest confidence, please do get in touch.

Insurance

The last day of the month saw two headline-grabbing insurance transactions, with German insurer Allianz simultaneously announcing the acquisition of Legal & General’s general insurance business for £242m and that it intends to acquire the 51% stake it does not already own in LV General Insurance Group. Taken together, these transactions will make Allianz the second largest general insurer in the UK with 12 million customers.

In broking, Global Risk Partners-owned hub broker Higos made its fifth and largest acquisition since 2017 by acquiring The Insurance Group (TIG), a specialist broker based in Plymouth focusing on residential and commercial property. Leicester based Chartered broker Erskine Murray announced its third deal in 18 months in acquiring Houghton Insurance Bureau in Bedfordshire and high street broker A-Plan confirmed it had bought books of business from Westward Counties Insurance Services and Acer Risk Services, based in Exeter and Glastonbury, respectively.

Private equity firm Dunedin backed the MBO of niche broker Acquis, focused on the finance and leasing industry. Dunedin separately owns Kingsbridge, a broker focused on insurance for contractors. Bowmark-backed Aston Lark announced its widely expected sale to a new private equity backer, Goldman Sachs Merchant Banking.

Rural & Commercial Holdings (RCH Group), part of the Primary Group, announced that it had acquired Precision Partnership, an MGA incubator whose portfolio includes PI underwriter Precision Underwriting and MS Amlin announced that it had acquired a strategic stake in Envelop Risk, a specialist reinsurance MGA.

Two notable minority deals were announced during May, with Madison Dearborn Partners and HPS Investment Partners acquiring additional shares in the Ardonagh Group for £92m and Korean insurer Samsung Fire & Marine making a minority investment in Lloyd’s insurer Canopius.

May also saw the failure of an unrated insurer, as Gibraltarian carrier LAMP Insurance entered liquidation.

Investment

The month kicked off with Souter Investments and Manfield Partners announcing that they had agreed to sell their holdings in Mobius Life, the leading independent provider of investment administration services to UK pension schemes, to Phoenix Equity Partners, the mid-market private equity fund, and management.

Broadstone, the pensions consulting and employee benefits provider which is backed by the private equity fund Livingbridge, announced two acquisitions: Glasgow-based Thomson Dickson Consulting, a provider of actuarial consultancy, scheme administration and governance services to trustees and employers; and 3HR Benefits Consultancy, a specialist provider of employee benefits and international private medical insurance support and services.

Royal London sold its defined benefit administration business, RL Corporate Pension Services, to XPS Pensions Group for £4.8m.

In the IFA sector, Fairstone acquired Leicester-based Brett & Randall Financial Services via its downstream buy-out model. Perspective acquired London-based Thornton Springer. Tenet bought the Preston-based member company Derbyshire Booth with £26m of client assets. Foster Denovobought London & Capital’s UK wealth business. CPF Advice was acquired by its management via the vehicle Fairways Advice.

SCOR Investment Partners acquired insurance-linked securities specialist fund manager Coriolis Capital, which runs the Atropos investment fund, representing $1.3bn in AUM.

UK investment managers were also expanding overseas, including Brewin Dolphin agreeing to buy the wealth management business of Investec Group in the Republic of Ireland for €44m, as it looks to raise £60m more from shareholders to shore up its capital position, and Schroders acquired Munich-based real estate boutique Blue Asset Management, which manages €1.2bn of assets.

FinTech

Private equity group BC Partners agreed to sell a controlling stake in Acuris, the owner of financial information service Mergermarket, to Ion Group, in a deal reported at £1.35bn, which will extend the expansion of Ion, a financial software and data business, into trading and cash management tools, data and analytics for capital markets. BC Partners and Acuris management are reinvesting and will retain minority ownership.

The payments sector remained very active in May. Nuvei announced the acquisition of SafeCharge, the payments technology firm offering online businesses the ability to manage omnichannel payments, for £699m cash, international payments firm TransferWise raised $292m, valuing the business at c. $3.5bn, led by investors including Lead Edge Capital, Vitruvian Partners and Lone Pine Capital. Current investors Andreessen Horowitz and Baillie Gifford expanded their holdings in the firm, while asset management firm BlackRock also invested.

Payment solutions provider EML Payments agreed to acquire Flex-e-Card, the shopping mall gift card solutions provider for £21.6m, Pollen Street Capital, the private equity firm backing Foreign Currency Direct, acquired Infinity International, the corporate payments specialist and Frog Capital led a £14m Series B investment round in API banking platform for digital businesses, Modulr, alongside Blenheim Chalcot, to accelerate its proposition in commercial and wholesale payments.

Flagstone, the UK cash deposit platform, raised £11m in growth capital from investors including Kindred Capital, Moneysupermarket Group, VentureFounders and a number of private individual investors, Penta Capital completed a £11m growth capital equity investment into CellPoint Mobile, the digital commerce and payments business for travel companies. Alternative investment manager Cordet Capital Partners, advised and coordinated a group of investment partners in the acquisition and further capital injection into omnichannel payment processing and business solutions provider Secure Trading, which also trade under the new brand name Tru//ST Payments and software and services providerClearCourse announced its purchase of instaGiv, the UK digital and mobile fundraising platform. Finally, in payments, Cryptomathic, the global specialist in secure server and payments solutions, announced the strategic acquisition of end-to-end EMV card lifecycle, transaction processing and PIN management provider, Aconite Technology.

In lending technology, SoftBank Group’s Vision Fund invested $800m in working capital finance provider Greensill, valuing the business at c. $3.5bn, to grow the business into new markets including India, Brazil and China. Flexible wage app business Wagestream closed a £15m Series A funding round, co-led by venture capital investors Balderton Capital and Northzone, in addition to a Shawbrook Bank credit facility of up to £25m and Nationwide Building Society announced an investment in Scaled Insights, the behavioural AI business analysing speech that could offer benefits for the Society’s members in the future.

In insurance technology, financial services private equity firm AnaCap Financial Partners acquired a majority stake in digital health insurance provider SundhedsGruppen and Certua, the data-driven financial technology company, acquired the insurance-based quote and buy platform, the Surely Group. Life insurance startup yulife raised £10m in a funding round led by Creandum Funds, with participation from MMC Ventures, Notion Capital, Anthemis Exponential Ventures, RGAX, and OurCrowd and Lloyd’s of London confirmed an investment in Layr, a cloud-based commercial insurance platform for small businesses, following a successful trial in the Lloyd’s Lab.

Elsewhere, Liquidnet, the global institutional investment network, acquired RSRCHXchange, the marketplace and aggregator for institutional research, and private equity house Maven Capital Partners led an investment of Symphonic Software, the Identity and Access Management player serving the financial services and healthcare industries. Existing shareholders Par Equity and the Scottish Investment Bank also participated.  Wealth management platform Huddlestock announced a merger with leading Norwegian fund manager Dovre Forvaltning and Mobeus Private Equityinvested £5m growth capital in Arkk, a UK-based software-as-a-service provider that digitises regulatory reporting.

Lending

It was a relatively quiet month in the lending M&A markets with most of the activity coming from previously announced transactions. Non-Standard Finance announced that its hostile offer for Provident Financial had become unconditional as to acceptances with c. 53.5% of Provident’s issued share capital having accepted the offer. However, just after the month end, Non-Standard Financeannounced the lapse of the offer as the PRA regulatory condition (relating to the potential change in control of Vanquis Bank) would not be met within the prescribed timetable.

Metro Bank announced that it had successfully raised gross proceeds of c. £375m, upsized from an initial target of £350m, through a share placing at 500p per share, a 5.2% discount to the preceding five day average closing price. Distribution Finance Capital Holdings announced the admission of its entire issued and to be issued share capital to trading on AIM, following a demerger from Trufin. Upon admission, the company was due to have a market capitalisation of c. £96m (based on the placing price of 90p per ordinary share). Aldermore announced the completion of its integration with MotoNovo Finance: both businesses are controlled by FirstRand.

There were also newly announced transactions: White Oak UK acquired Growcap Finance, a Dublin-based provider to the SME market in the UK and Ireland; and Ramsdens Holdings announced the acquisition of four stores currently trading as The Money Shop and 12 loan books from Instant Cash Loans for a total consideration of £0.5m.

April saw the largest ever Series A fund raising for a European FinTech company and the launch of two new insurance vehicles by luminaries of the industry. It also witnessed the continuing contested bid for Provident and Quilter making a recommended cash-offer for AIM listed Lighthouse Group. In addition, Sanlam and Brewin Dolphin both announced two acquisitions each and the latter confirmed talks on a third.

Rising liquidity and strong confidence have fuelled activity and broadened the strategic horizons for businesses in financial services of late. As the devil is in the detail on many of the deals, the gain may be in seizing the opportunity, the window of which remains widely open to bringing about rationalisations, improved solutions and enhanced services, all of which are driving the creation of value.

If you are thinking about your own strategic options and value creation, please do not hesitate to contact any of us here at IMAS

Insurance

The major announcements arrived at the end of what had otherwise been a quiet month, with two well known participants returning to the market with significant new vehicles. Stephen Catlin, together with Paul Brand, Onex Corporation, PSP Investments and a consortium of co-investors, announced the launch of their new international and specialty insurer and reinsurer Convex Group with capital of $1.8bn and based in Bermuda and London. Shortly afterwards Steve McGill, ex-Aon group president, announced the launch of Warburg Pincus-backed specialty risk solutions business, McGill & Partners, with an initial commitment of up to $250m, based in London and New York.

Admiral Group announced a joint venture with Oakley Capital and MAPFRE to combine its Rastreator with Asesor Seguros Online and Asesor Consumer Services (together “Acierto”), bringing together two of Spain’s most regarded digital brokers. Canopius and AmTrust Lloyd’s signed a merger agreement which will create a $2.2bn GWP organisation and make it a top 5 Lloyd’s managing agent; being subject to regulatory approval.

Nexus Underwriting acquired Credit & Business Finance Ltd (a trade credit specialist) and Capital Risks MGA Ltd (a Warranty & Indemnity MGA) after having secured additional funding of £14m from HPS Investment Partners and £2m from B.P. Marsh & Partners. Aston Lark acquired Jobson James Insurance Brokers, with four offices in the Midlands, and its specialist employee benefit practice Jobson James Consulting.

Other transactions were concluded by Ceta Insurance which acquired Love Your Hut from Precision Underwriting (UK), MGA incubator Vibe MGA management was acquired by US-based Pro Global Insurance Solutions from Vibe Group which is backed by Quantum Strategic Partners and Pine Brook Partners. J M Glendenning acquired Ridley Macmillan Insurance brokers, which is based in Scarborough, and Woodgate and Clark owner Van Ameyde acquired marine surveyor and consultancy McAusland Turner.

Elsewhere Aquiline Capital Partners recommitted to backing ERS, believing that it represents a growth opportunity with efforts focused on building book value and increasing earnings and returns.

Investment

Quilter, through its advice arm Intrinsic, made an agreed and recommended £46.2m all-cash offer for the AIM-listed advice firm Lighthouse which has some 400 advisers in its network.

Sanlam agreed to acquire Thesis Asset Management, including its investment management business with £1.2bn of discretionary AUM and financial planning provider. Sanlam also announced the acquisition of the financial planning and employee benefits firm Blackett Walker.

Brewin Dolphin acquired Bath-based Epoch Wealth Management which provides financial planning advice to over 700 clients with c. £0.5bn of combined investible assets. In addition, Brewin Dolphinacquired the pension and actuarial consulting firm Mathieson Consulting and confirmed that it was in exclusive discussions with Investec over the potential acquisition of the South African group’s Irish wealth management business.

Elsewhere in the sector, Lumin Wealth Management agreed to acquire Hyperion Financial Planningand CPF Advice was bought out by its management.

Just after the end of the month Souter Investments and Manfield Partners announced that they had agreed to sell their stakes in Mobius Life, the leading independent provider of investment administration services to UK pension schemes, to Phoenix Equity Partners, the mid-market private equity fund, and management. Also, Broadstone, the pensions consulting and employee benefits specialist which is backed by the private equity fund Livingbridge, announced it had acquired Glasgow-based Thomson Dickson Consulting, a provider of actuarial consultancy, scheme administration and governance services to trustees and employers.

FinTech

Checkout.com, the merchant payment solutions provider to enable payments across all geographies and channels, raised $230m in Europe’s largest FinTech Series A round led by growth investors Insight Partners and DST Global. Singapore’s sovereign wealth fund GIC, Blossom Capital, Endeavor Catalyst and other strategic investors are also participating in the round which will be used to continue its rapid growth in Europe, the US and the Middle East, with further expansion into Asia and Latin America.

Also in payments, Masabi, the public transport SaaS ticketing and payments platform, raised $20m in a growth funding round led by new investor, Smedvig Capital, with MMC Ventures and other existing investors participating. Nationwide Building Society’s venture fund invested in bill payment startup Ordo which offers protection from invoice and payments fraud and Just Eat, the online food delivery business, acquired Practi, a Point of Sale software service for independent restaurants and small chains for an initial £6.7m. Crown Agents Bank acquired the enterprise business and payment gateway product of Segovia, a US venture-backed technology company focused on frontier market payments, to advance its B2B offering and promote global financial inclusion and UAE-based payments and foreign exchange company Finablr, whose brands include UAE Exchange, Travelex Holdingsand Xpress Money, confirmed plans for an initial public offering on the London Stock Exchange to raise $200m from the sale of at least 25% its equity in new stock.

In lending technology, Salary Finance, the salary-linked savings and employee loans business, raised $32.8m and hired SoFi co-founder Dan Macklin for US expansion in a Series C funding round led by existing investors Legal & General and Blenheim Chalcot. Vision Blue, the provider of compliant software solutions for the credit and debt recovery sectors, acquired SamePage Group, the fully-digital loan origination software platform. Acre Software, a startup using blockchain technology to revamp the mortgage and insurance application process for advisers, raised £5m from Aviva and Sesame Bankhall Group and Welendus, a peer to peer lending platform, raised money from the Unicorn Ascension Fund (UAF) Pontaq, a venture fund focusing on cross-border technology transfer between the UK and India, for future expansion into India.

In banking and capital markets, Kyriba, the cloud treasury and finance solutions platform, closed a $160m growth investment round led by Bridgepoint, the private equity group, giving Bridgepoint a majority stake in the business and Bankable, the global provider of “Banking as a Service” solutions, announced a strategic partnership as well as a financial investment from Visa to enable financial institutions and banks to access real-time and modular banking solutions worldwide.

Barclays led a $6m Series A funding round for Simudyne, a simulation technology firm used by banks for stress testing and contagion management, joined by Graphene Ventures and Gauss Ventures and finally Torstone Technology, the provider of post-trade securities and derivatives processing technology, acquired Percentile, a provider of real-time, cloud-based risk and compliance technology to global financial markets.

Elsewhere, SBI Investment led a $50m investment in Onfido, the artificial intelligence-based document verification and facial biometrics business alongside existing investors Salesforce Ventures, M12(formerly Microsoft Ventures) and Fin VC, Cytora, a provider of AI-powered solutions for the commercial insurance industry, secured £25m in a Series B funding round led by EQT Ventures with other participants including existing investors Cambridge Innovation Capital, Parkwalk, and a number of angel investors. Financial services specialist consultancies Catalyst (backed by private equity firm Livingbridge in 2017) and Sionic Advisors merged to form a specialist consulting firm with $60m+ combined revenue globally.

Lending

The bitter battle for control of Provident Financial continued with Non-Standard Finance announcing 15 May as the last date on which their offer can be declared unconditional as to acceptances. The Board of Provident Financial re-confirmed that it does not recommend the offer, citing material strategic, operational and financial flaws, and strongly advised all Provident shareholders to take no action.

TruFin announced, subject to shareholder approval, the demerger of Distribution Finance Capital to a new holding company, Distribution Finance Capital Holdings, to be admitted to trading on AIM, which TruFin believes will maximise the opportunity for DFC to obtain a bank licence. In addition, TruFinannounced the sale of its entire stake in Zopa Group to Arrowgrass Master Fund for £44.5m, subject to TruFin shareholder approval.  TruFin is intending to invest £25m of the proceeds from the sale into DFC to fund its Tier 1 equity.

Arbuthnot Banking Group announced that its subsidiary Arbuthnot Latham & Co. had sold 1.05m ordinary shares of the capital of Secure Trust in an institutional placing, raising gross proceeds of c. £15.3m and leaving Arbuthnot with a residual 9.85 per cent. stake in Secure Trust.

Elsewhere, Quilam Capital announced that it had made an investment into Propensio Finance, a specialist provider of consumer finance in the home improvements sector. Brightlane announced the completion of its acquisition of VATBRIDGE, a specialty financing company for commercial properties. In addition, two previously announced transactions completed: a £60m equity investment by Värde Partners in Masthaven; and Indian industrialist Sanjeev Gupta completed the acquisition of Diamond Bank UK, now to be known as the Commonwealth Trade Bank.

The quarter ended with a bang in financial services M&A with FIS agreeing a $43bn takeover of Worldpay while transaction volumes counted over 60 announced deals worth over £5m each. Activity in most of the subsectors remained high amidst continuing capital raises for fintech businesses and consolidation in general insurance distribution and wealth management.

The public markets arena came into the spotlight with several mergers and offers, including a hostile bid for Provident Financial, a merger of One Savings Bank and Charter Court Financial Services Group as well as a £206m recommended offer for IFG Group, which owns James Hay and Saunderson House. Just after the month end, Lighthouse Group was also subject to a £46m all-cash offer.

The strong liquidity, especially in the market below £100m of value, also encouraged private equity funds to use their nous and realise investments, as in the case this month by Synova selling Defaqto, and providing capital and support for synergistic acquisitions of their portfolio companies.

As ever, we remain keen to hear from you and will treat all conversation about your strategic options with strictest confidence

Insurance

Perhaps reflecting the political uncertainty of what had long been anticipated to be a key month for the UK, Insurance M&A activity in March was more muted than in previous months, but a number of notable transactions did take place.

Early in the month private-equity backed Lloyd’s broker Tasker Insurance Group acquired Castle Insurance Consultants, a specialist broker based in Lincolnshire that will become part of Tasker’s retail arm, Tasker Insurance Brokers. Chartered broker Adler Insurance Group announced its fourth acquisition in three years in acquiring the general insurance assets of Midlands-based financial services group Corrigans, Shropshire-based commercial broker John Henshall acquired Bayliss & Cooke in Staffordshire and Brunel Insurance Brokers acquired Glentworth Insurance Services, a £10 million GWP broker with offices in the South West.

In personal lines SPB UK, the UK arm of European affinity specialist SPB Group, acquired Loyal Insurance and Square Pound, the online providers of mobile phone and gadget cover behind the Insurance2Go and Better Busy Insurance brands, Arch Insurance International invested in tech-driven MGA Archipelago Risk Services and Aston Lark announced the acquisition of Dorset-based household specialist Highworth Insurance.

In Claims Management, Sedgwick acquired Adams Media Loss Adjusting, a specialist in media and entertainment services.

Lastly, Jardine Lloyd Thompson announced that it had sold its global aerospace business division, including the assets of Hayward Aviation, to Arthur J Gallagher. The transaction was effected as a remedy arising from JLT’s need to address European Commission concerns around business overlap arising from its ongoing acquisition by Marsh, which is expected to close shortly. In a month that saw a flurry of press around Aon’s possible interest in a mega-merger with Willis Towers Watson – before quickly being quashed by Aon – the sale demonstrates that synergistic combinations between the largest companies will often attract competition issues.

Investment

IFG Group, the owner of the wealth manager Saunderson House and the pension administration provider James Hay, accepted an offer from funds managed by the private equity firm, Epiris, for the entire share capital for a total value of £206m.

Elsewhere in the wealth management sector, Canaccord Genuity Wealth Management agreed to acquire the private client operations of Thomas Miller Investment, with c. £1bn of client assets, for a maximum of £28m. The Private Office bought the London-based wealth management division of SRLV Accountants, SRLV Financial and Quilter Private Client Advisers acquired York-based financial advice firm Mount Sterling Wealth, which was placed into administration during the month.

Mattioli Woods, the specialist wealth management and employee benefits business, announced the acquisition of SSAS Solutions, the Belfast-based provider of bespoke, specialist pension advisory service to 350 SSAS schemes with approximately £380m of assets under administration, for a maximum total consideration of £4.01m.

FinTech

Leading Fintech deals in March was the merger agreement between FIS, the financial services technology business and Worldpay, the eCommerce and payments business, to expand FIS’s acquiring and payment offerings and significantly increase Worldpay’s distribution footprint. Under the terms of the agreement, FIS shareholders will own c. 53% and Worldpay shareholders c. 47% of the combined company. The combination of stock and cash values Worldpay at an enterprise value of approximately $43bn, including the assumption of Worldpay debt, which FIS expects to refinance.

Also in payments, following Visa’s response in February to Mastercard’s competing offer for the acquisition of cross-border payment firm Earthport, Mastercard subsequently dropped its pursuit of Earthport and the FCA has now approved the acquisition of Earthport by Visa. EVO Payments, the global payment technology and services provider, acquired payment gateway Way2Pay, FMO invested in dopay, an early stage payments and banking business centred on the payroll of underserved employees in emerging markets and Prepaid Financial Services acquired Barclaycard’s UK Physical Prepaid Card Portfolio which enables PFS to offer an enhanced service to existing and future payroll and corporate clients.

Digital business bank Tide plans to raise funds matching the £60m grant recently awarded to clearing bank partner ClearBank by the Banking Competition Remedies Board.  Tide is planning Series B and C investment rounds in the next two years to secure the additional £60m funding to capture an 8% market share by 2023.  Pagantis, the e-commerce consumer finance business, closed a $75m Series B funding round (debt and equity) with Prime Ventures, SPF Investment Management (previously Credit Suisse Asset Management) and Rinkelberg Capital Group. Building society Nationwideinvested £15m in 10x Future Technologies, as part of a Series B funding round, for a minority shareholding as part of a collaboration to deliver a digital platform for Nationwide.

In trading technology, Bowmark Capital is backing the MBO of Pirum Systems, the post-trade market infrastructure technology provider for the global securities finance industry, from Five Arrows Principal Investments, Singapore Exchange acquired a 20% stake in FX trading platform provider BidFX (a subsidiary of TradingScreen) for $25m to grow its business in FX futures, trading and investment platform eToro announced the acquisition of blockchain firm Firmo to grow tokenised financial assets on its platform, OpenGamma, the open source financial software provider and provider of derivatives risk analytics, raised $10m led by Dawn Capital to expand its personnel in London, New York and Singapore and also launch new products in the collateral and treasury sector and Stable, the food price volatility hedging platform, raised $6m backed by Anthemis, Syngenta Ventures, Baloise and Ascot Underwriting.

In regulation and compliance, compliance provider SimplyBiz Group acquired financial products and funds platform Defaqto for £74.3m, as it expands into banking and general insurance whilst offering Defaqto support in the advisory and asset management sectors. In 2018 Defaqto generated revenues of £12.8m and the acquisition will include £3.4m of cash at completion. Tookitaki, an artificial intelligence-based compliance solutions provider for financial institutions, raised $7.5m Series A funding led by Illuminate Financial and Jungle Ventures and joined by Enterprise Singapore, Supply Chain Angels and VWX Capital.

Elsewhere, IslamicMarkets, the financial intelligence, e-learning and investment platform focused on the global Islamic economy, received a strategic investment from New World Capital Advisors, Acuris, the BC Partners and GIC-backed provider of global data, intelligence, research and analysis acquired Blackpeak, the due diligence, research and investigation services firm and Arch Insurance International invested in personal lines MGA InsurTech startup Archipelago Risk Services.

Lending

M&A activity within the public equity markets remained strong with the announcement by the Boards of OneSavings Bank and Charter Court Financial Services Group that agreement had been reached on the terms of a recommended all-share combination to be effected by means of a scheme of arrangement.  Under the terms of the combination Charter Court shareholders will own c. 45 per cent. of the share capital of the combined group. Following last month’s hostile all-share offer for Provident Financial, Non-Standard Finance announced the posting of its offer document and prospectus which elicited a response from the Board of Provident advising Provident shareholders to take no action in relation to the offer.  Thus far, Non-Standard Finance has received acceptances from Providentshareholders representing 50.7 per cent. of Provident’s share capital.

Capital raisings continued apace. City of London Group announced that it had received firm commitments to raise c. £15m in new funds to support the development of its lending business, comprising c. £13m in gross proceeds from new ordinary shares and c. £2m in unsecured convertible loan notes. RM Secured Direct Lending announced it had received commitments from a share placing to raise gross proceeds of c. £13.5m in order to provide additional funding for investment opportunities. Fuel Ventures expanded its portfolio of early-stage companies, investing £2m in CreditDigital, an instalment finance provider to businesses online and at point of sale.

Elsewhere, UK Asset Resolution announced that NRAM had agreed to sell two separate portfolios of residential owner-occupied mortgages and unsecured loans to Citi for a total of £4.9bn. Braemar Finance, Close Brothers’ professions finance provider, announced that it had acquired finance brokerCapital Lease Solutions. Downing announced that it had completed the acquisition of P2P lender Funding Empire, the company behind Downing Crowd’s platform technology.

February did not bring any further clarity to the UK political scene but M&A and capital raising activity in the UK Financial Services continued unabated, with a number of FinTech and challenger banks featuring and banks’ corporate venture funds continuing to invest. Including beneficiaries of £280m from the Capability and Innovation Fund Pool A (RBS state aid remedies package), the lending sector alone raised over $1bn in capital commitments this month whilst more established acquirers have completed transactions to secure their position in Europe.

Non-Standard Finance’s unsolicited £1.3bn offer for Provident Financial brought “tanks on lawns” comments, especially given the backgrounds of the two chairmen and there were a number of transactions and fund raisings in the challenger banking, lending technology and asset finance areas. OakNorth, Starling, Iwoca and Evolution Funding all raised significant new funds whilst in payments, China’s Ant Financial acquired WorldFirst for c. £0.5bn.

We welcome the opportunity to discuss M&A and financing options for your business with you and would be delighted to hear from you to arrange a meeting.

Insurance

February saw a continued flow of announced transactions in the General Insurance segment, mainly on the distribution side and with two of the most prolific consolidators announcing new acquisitions.

Early in the month Peter Cullum-backed consolidator Global Risk Partners (GRP) announced that it was acquiring Trimulgherry Investments (TIL), a collection of six brokers and three MGAs also majority-owned by Peter Cullum. The acquired businesses, with around £45m of GWP, will be integrated into the MGA and broking divisions of GRP. A fortnight later GRP announced the acquisition of Shearwater Insurance Services, an equine insurance specialist based in Hertfordshire, bringing the group’s total deal count since its formation in 2013 to 48.

Elsewhere, PIB announced it had acquired Optis Insurance, an Irish MGA focused on the SME sector that gives the group its first business outside the UK and comes just a month after Aston Lark announced its first acquisition in Ireland. Staying in Ireland, German insurer ARAG Group announced it was acquiring the Irish operations of DAS Legal Expenses, which currently operates as a branch of DAS’s UK business.

In Scotland, Greenwood Moreland acquired fellow Broker Network member Campbell Smith in a transaction that will take the former to £10m of annual GWP.

In the London market, Canopius has reportedly agreed commercial terms to acquire AmTrust at Lloyd’sfrom its US parent AmTrust Financial Services establishing itself as one of the biggest players in the Lloyd’s market with a combined stamp capacity of c. £1.5bn and Dallas-headquartered U.S. Risk Insurance Group (US Risk) announced that it will be acquired by USI Insurance Services (USI). US Risk owns UK businesses MGB Insurance Brokers, Oxford Insurance Brokers and James Hampden International.

Finally, private equity firm Preservation Capital Partners announced it had made a strategic acquisition in Cove Programs, a US-construction focused MGA. This is Preservation’s second MGA deal, following its acquisition of Ascent Underwriting last year.

Investment

Investment management specialist Cardano Group agreed to acquire the UK’s third largest workplace pension auto-enrolment provider, Now:Pensions, from the Danish pension fund, Arbejdsmarkedets Tillaegspension. Investment consultants and model portfolio provider Albermarle Street Partners merged with Atlantic House Fund Management, the investment management arm of Catley Lakeman Securities.

Following an earlier announcement that the stockbrokers were in talks, Shore Capital agreed to acquire Stockdale Securities for an initial consideration of £4.9m and a maximum deferred consideration of up to £4.0m.

Among the IFAs and wealth managers, London-headquartered Dolfin agreed to acquire Falcon Private Wealth, the UK business of Swiss-based Falcon Private Bank. Quilter acquired Charles Derby in a deal set to quadruple the number of advisers in its national advice business. Progeny Group acquired Edinburgh-based Innovative Financial Planning, Buckinghamshire-based Quest Financial Solutions and Sussex-based Juno Wealth Management. Harwood Wealth Management acquired Castleton Financial Planning for £1.6m and Foster Denovo acquired Kent-based Orchard Wealth Cultivation. Perspective Financial Group acquired northwest-based Investment Principles and Fairstone Group acquired Pensions and Wealth Management Services, with c. £200m of client assets under advice, as part of its downstream buy-out programme.

Elsewhere in the sector, Personal Group Holdings announced their intention to acquire the UK’s largest independent pay and reward consultancy Innecto Reward Consulting.

FinTech

The lending technology sector attracted headlines in February as SME lending platform OakNorth Holdings announced a $440m investment from the SoftBank Vision Fund and the Clermont Group. The investment is subject to standard closing conditions and regulatory approval and takes its total primary and secondary funding to over $1bn and will be used to launch its lending operations in the US. Awards from the Capability and Innovation Fund Pool A designed to promote competition in the market for banking services to SMEs and part of the £750m RBS remediation package demanded under EU rules saw Metro, Starlingand ClearBank awarded a combined £280m with Metro Bank granted £120m, Starling £100m and ClearBank, in collaboration with SME banking startup Tide, £60m.

Starling Bank also raised a £75m investment round, with asset manager Merian Global Investors leading the round with a £50m investment and existing Starling backer Harald McPike, a Bahamas-based hedge fund investor, invested a further £25m. This nets Starling £175m in funding this month following its £100m award from the Capability and Innovation Fund. Small business lending challenger Iwoca closed a £150m fundraise, led by an earlier £7.5m investment from Augmentum Fintech and understood to have been structured as a £20m Series D equity funding round and £130m in debt capital. Existing investor Prime Ventures also participated, alongside NIBC Bank. Interest-free-only credit partner DivideBuy raised c. £60m of equity investment and debt financing from Souter Investments and Perscitus with debt facilities provided by Shawbrook and Paragon Bank, SME liquidity business Proactis secured £20m funding from HSBC UK to help businesses to manage supply chains, working capital and supplier relationships and online mortgage broker Mojo Mortgages raised £7m in a Series A funding round led by NVM Private Equity and Maven Capital Partners.

Payments was also busy as Alibaba unit Ant Financial, the financial services firm led by billionaire Jack Ma, completed its acquisition of money transfer and currency exchange firm WorldFirst following talks reportedly at $700m in recent weeks. WorldFirst recently announced plans to shut its U.S. operations to placate U.S. regulators, which previously rejected Ant Financial’s prior bid to buy money transfer service MoneyGram for $1.2bn. Visa responded to Mastercard’s competing offer for the acquisition of cross-border payment firm Earthport, submitting a £247m cash offer for the business versus the £233m offer tabled by Mastercard and £198m previous offer for the business. Mastercard is understood to be considering its options in light of Visa’s revised offer.

GoCardless, the online recurring payments business, secured $75m in Series E funding to fund a global bank debit network from Google Ventures, Adams Street Partners and Salesforce Ventures, as well as existing investors Notion Capital, Balderton Capital, Passion Capital and Accel. Rapyd, a fintech-based payment platform, announced a $40m Series B financing round led by General Catalyst and Stripe, with participation from Target Global, IGNIA and other strategic payments and fintech companies, to expand its technology platform whilst Bink, the payment linked loyalty company, closed a £10m funding round led by Barclays, which will take a minority stake in the company, to bring its solution to a broader group of retailers and consumers world-wide.

In trading technology, Kraken, the digital asset exchange, acquired Crypto Facilities, the regulated cryptocurrency trading platform and index provider to create a global leader in cryptocurrency spot and futures trading, in a reported nine figure deal and Kraken’s largest acquisition to date, capital markets blockchain startup Nivaura raised $20m led by the London Stock Exchange Group, with other investors including Santander InnoVentures, law firms Linklaters, Allen & Overy and Orrick, Transamerica Ventures, MiddleGame Ventures and Digital Currency Group and finally SPiCE VC, the tokenised venture capital fund, invested in Archax the forthcoming institutional digital securities exchange.

In insurance technology platform Acturis completed the replacement of former investor Summit Partnersby Astorg, the European private equity firm and Palatine Private Equity backed the MBO of SMP Group, the corporate, trust and professional services provider. Identity data intelligence specialist GBG, acquired IDology, the provider of identity verification and fraud prevention services, for £233m in an all-cash transaction, CoverHound, the property and casualty digital insurance platform, raised a $58m Series D funding round led by specialist insurer Hiscox, with additional investors including Chubb, Aflac Venturesand MS&AD and By Miles, the pay-per-mile car insurance provider, raised £5m in a Series A funding round led by Octopus Ventures with follow on investment from Insurtech Gateway, InMotion Ventures and JamJar Investments.

Finally, investment management specialist Cardano Group acquired workplace pension provider Now: Pensions from Danish pension fund, Arbejdsmarkedets Tillaegspension, HANetf, the white-label UCITS ETF platform, completed its second funding round for an undisclosed amount led by ThirdStream Partnersjoining existing shareholders Point72 Ventures, Anna Money, the financial admin app and business account startup for small businesses, raised £8.5m from investment firm Kinetik, Hivemind, the data science company and member of the Investment Association’s fintech accelerator Velocity, closed a funding round led by Fidelity International and Barclays and Datacard, the trusted identity and secure issuance technology solutions provider, acquired Thales’s market-leading General Purpose Hardware Security Module (GP HSM) business, nCipher Security, which is being divested in accordance with regulatory clearances necessary to complete Thales’s acquisition of Gemalto.

Lending

February was characterised by significant M&A activity within the consumer finance sector and continued capital raisings by new challenger banks. Non-Standard Finance announced a nil premium all-share offer for Provident Financial with formal support from Provident’s shareholders representing over 50% of the company’s share capital. Valuing Provident Financial at c. £1.3bn with Provident shareholders due to control c. 88% of an enlarged group, the offer was formally rejected by the Board of Provident.

There was further activity in the consumer finance sector. Morses Club announced two acquisitions:  the business and assets of Hays Credit, a home collected credit lender with outstanding balances of c. £1.6m; and the business and certain assets of CURO Transatlantic, trading as WageDayAdvance, out of administration for c. £8.5m. Ramsdens Holdings announced the acquisition of the business and certain operating assets of a selected portfolio of 18 stores currently trading as The Money Shop for £1.5m. CYBGannounced a joint venture with Salary Finance in which it will acquire a 50% stake in return for an initial cash consideration of £0.5m. CYBG will also provide an initial c. £100m rolling credit facility to the JV.

Challenger bank capital raisings continued apace. OakNorth closed a $440m fundraising round led by SoftBank Group’s Vision Fund with a $390m investment and Clermont Group providing the remainder.  Metro Bank announced that it had entered into a standby underwrite agreement for a c. £350m equity raise, expected to be launched in the first half of 2019. Starling Bank announced it had raised £60m in a Series C funding round led by Merian Global Investors, and a further £15m from an existing investor. PCF Group announced a share placing raising gross proceeds of £10m, representing c. 15.6% of its existing share capital, and an open offer to raise up to £0.75m.

Elsewhere, Evolution Funding, a B2B car finance broker, announced a transaction with LDC, valuing the business at £110m. The transaction will see LDC take a significant minority stake in the business.

Notwithstanding the continuing political uncertainty in the UK and overseas, M&A and capital raising in the UK financial services sector continued in January albeit without the announcement of any £1bn+ deals other than the reported plans by Rothesay Life to make a £3.5bn bid for Swiss Re’s UK arm ReAssure, which has also been exploring a potential IPO.

Overseas acquirers remain busy and payments businesses World First and Earthport both made headlines, with the former in discussions on a mooted $700m offer from China’s Ant Financial and the latter announcing a £198m recommended offer from Visa which was then subsequently followed by a £233m counter offer from Mastercard in January. Similarly in insurance distribution, Arthur J Gallagher announced the acquisition of Stackhouse Poland.

In the capital markets, Marsh & McLennan Companies priced its bonds for the takeover of Jardine Lloyd Thompson and Hg Capital refinanced A-Plan. One notable trend across early stage FinTech financings during the month was the participation of a range of banks’ corporate venture funds – again further evidence of the continued pressure on their core business models as regulation, changing customer expectations and technology reshape the industry.

As ever, should you wish to discuss M&A and financing options for your own business, we would be delighted to hear from you.

Insurance

2019 got off to an active start with notable Insurance M&A activity across underwriting, distribution and claims.

There were two sizeable transactions announced in the UK motor sector. The Co-op agreed to sell its insurance underwriting business CIS General Insurance to create a new distribution agreement for home and motor policies with Markerstudy in a deal worth £185m and private equity firm Inflexion announced a minority investment in Granite Underwriting, via its Partnership Capital Fund.

As touched upon in our December newsletter, the standout transaction on the distribution side was the announcement that Arthur J Gallagher will acquire Stackhouse Poland, the specialist broking group that has been backed by private equity firm Synova. This transaction will only serve to further focus attention on the other private equity-owned consolidators and during the month Bowmark-backed Aston Lark confirmed that it had appointed bankers to explore further investment in the business. Aston Lark followed this by announcing its first international acquisition of Dublin-based broker Robertson Law.

Also in general distribution, Dunedin-backed Kingsbridge announced the acquisition of on-demand PI provider Dinghy, Buckinghamshire-based broker MRIB Group acquired schemes specialist Independents, Broker Network member Saffron made its third acquisition in a year by acquiring Broker Network stablemate Farmer Insurance Brokers and GRP-backed County Group made its fourth acquisition in six months when it acquired Swinford Insurance Consultants.

In Claims, acquisitive Davies Group announced that it had acquired TopMark Claims Management, a Glasgow-based specialist trading as TMS and focused on public sector claims. Davies Group also announced that it had secured a minority investment from Alberta Investment Management Corporation(AIMCo), the Canadian pension fund, which will sit alongside private equity backer HGGC. AIMCo is just the latest Canadian pension fund to invest in the wider UK general insurance sector, with both Hyperion and BGL also having secured investment from similar sources (CDPQ and CPPIB respectively) over the past 18 months. Across the Atlantic, another Canadian pension manager, PSP Investments, made an investment in Alliant Insurance Services, one of the US’s largest independent brokerage firms, reinforcing an increasingly common theme.

Finally, in the debt capital markets, Marsh & McLennan Companies announced the pricing for its bond issuance funding its takeover of Jardine Lloyd Thompson and Hg completed a refinancing of A-Plan, taking the proceeds returned to the Hg7 fund to just under £200m, c.1.3x its original investment in the business.

Investment

Sky News reported that Rothesay Life, the specialist life insurer, is planning a £3.5bn bid for ReAssure, the UK arm of Swiss Re which manages the closed books of life companies and has been subject to preparations for a stock market flotation.

Virgin Money and Aberdeen Standard Investments (ASI) agreed a strategic joint venture pursuant to which ASI will acquire 50% of Virgin Money Unit Trust Managers for an upfront payment of at least £40m. The JV will enable Virgin Money to provide investment solutions from a broad range of funds to its group’s (including Clydesdale Bank and Yorkshire Bank) 6 million customers.

Nutmeg, the start-up online investment management provider, raised £45m in a round led by Goldman Sachs and Convoy, the Hong Kong-based financial advisory firm.

Elsewhere in wealth management, Saltus Investment Management acquired Lorica Wealth with over £300m of AUA. Punter Southall Aspire acquired Dorset-based Coleman Financial Services with £275m of client assets. Canaccord Genuity Wealth Management acquired Worcester-based McCarthy Taylorwith £171m in client assets and Kingswood acquired Oxfordshire-based Thomas & Co Financial Services with £150m of client assets for up to £3.3m. Quilter Private Client Advisers added another £130m of client assets with the acquisitions of Manchester-based Freedom Financial Planning and Reading-based Stephen Spires Financial Consultants. Perspective Financial Advisory Group acquired Newcastle-based Galloway Whitfield (Life & Pensions) and Marlborough Holdings Group bought a 19.9% stake in national IFA Continuum. City of London acquired Acorn from Oaks Financial Servicesand Sanlam acquired Preston-based Astute Wealth Management.

In the employee benefits consulting area Howden entered into an agreement to acquire Punter Southall Health & Protection and its trading subsidiaries from Punter Southall Group, and Broadstone, being backed by the mid-market private equity fund Livingbridge, acquired CS Financial Solutions from the management and MSIF, the Liverpool-based business funding provider.

City stockbroker Shore Capital confirmed that it was in talks about a potential acquisition of rival Stockdale Securities and FNZ, the developer and provider of technology for investment platforms, took a 9% stake in Embark Group, the retirement solutions provider.

FinTech

The payments sector continued to be busy over the Christmas period and into the new year. Following discussions revealed in late 2018, WorldFirst is in negotiations on a $700m takeover by China’s Ant Financial and is understood to be shutting down its US operations, reportedly to minimize the risk of the deal being derailed by US regulators. Mastercard opened competition with rival scheme Visa for the acquisition of cross-border payment firm Earthport, submitting a £233m cash offer for the business versus the £198m offer tabled by Visa during the Christmas period. Earthport is now scheduling shareholder meetings for 21 February to consider the new offer. Also in payments, Allied Irish Banks is understood to be in discussions to acquire consumer payments network Payzone for up to €100m, having been acquired by Carlyle Cardinal Ireland in 2015 for €39m and Beringea, True Ventures and Route 66 led a $9m investment into AccessPay, the corporate payments startup.

Lending technology was also very active. Barclays and Santander InnoVentures led a £26m Series B funding round in online invoice financing platform MarketInvoice. The round was joined by venture fund Northzone and technology credit fund Viola Credit, which is also providing MarketInvoice with a £30m debt facility. Open Banking outfit Bud raised $20m with support from Goldman Sachs, HSBC, ANZ, Banco Sabadell and Investec, as well as Lord Fink, the former chief executive of hedge fund Man Group, and 9Yards Capital and Consumer Credit Solutions acquired a controlling share in Castlefields Computer Consultants, whose software is used to assist completing customers’ finance applications. Aire, the credit scoring fintech startup, raised $11m Series B funding round led by Crane Venture Partners and joined by Orange Digital Ventures and the venture arm of Experian, FinTech investor Augmentum Fintech plc announced an investment of £7.5m in online lending platform Iwoca, business lending platform Growth Street raised £7.5m scale-up investment led by Merian Chrysalis and RBS’s new digital bank Bó paid £5m for a 25% stake in student-focused banking startup Loot with a further £2m investment on top of a previous £3m.

In investment technology, Goldman Sachs Principal Strategic Investments Group co-led a £45m funding round for digital wealth management startup Nutmeg alongside existing investor and financial advisory firm Convoy and JPMorgan took a minority stake in UK workplace pension provider Smart Pension which forms part of a strategic placement funding round, bringing total capital raised to date to £50m. Aberdeen Standard Investments made a $13m minority investment in Asian digital life insurer Singapore Life following IPGL’s acquisition of a controlling stake last month, retirement platform The Embark Group sold c. 9.1% of equity to platform technology provider FNZ alongside an extension to its commercial relationship to 2028 and Augmentum Fintech led the £7.5m Series A fundraising alongside dmg ventures, SAATCHiNVEST and Kindred Capital, in Farewill, the all-in-one financial and legal services platform for dealing with death.

In trading technology, London Stock Exchange Group announced that it will acquire an aggregate 4.92% stake in Euroclear’s share capital for €278.5m (£241.9m), IHS Markit took a minority stake in blockchain-based post-trade processing network Cobalt, embedding its MarkitSERV operation deeper into currency trading back offices and Payward Inc, the operator of global bitcoin exchange Kraken, acquired Crypto Research Limited, the FCA regulated crypto currency platform and index provider.

Elsewhere, online insurance specialist Dinghy was acquired by Dunedin-backed Kingsbridge Insurance Brokers, anti-fraud behavioural analytics firm Featurespace raised £25m in a funding round led by Insight Venture Partners and MissionOG as well as IP Group, Highland Europe, TTV Capital, Robert Sansom and Invoke Capital and Mimiro (formerly ComplyAdvantage) raised $30m from Index Ventures and Balderton Capital to accelerate the global expansion of its machine-learning platform for analysing the risk of financial crime.

Lending

SME asset finance and FinTech capital raisings continued to be dominant themes for the lending M&A markets as the year got underway. Praetura Asset Finance acquired Kingsway Finance to form one of the largest independent UK SME asset finance groups with a loan book of c. £100m. The transaction was financed by a £15m loan note investment by RM Funds. Performance Finance acquired Integra Asset Finance, thereby expanding into the beauty and medical aesthetics market.

Augmentum Fintech announced a £7.5m investment in iwoca, the challenger SME lender, to fund balance sheet expansion and accelerate growth. MarketInvoice announced a £26m Series B fundraising led by Barclays, Santander InnoVentures, existing shareholders Northzone, and Viola Credit which also provided a £30m funding line.

Elsewhere, Lonsdale Capital Partners acquired a majority stake in mortgage broker Charles Cameron & Associates; Macquarie Corporate and Asset Finance made an initial £1.2m equity investment in luxury vehicle leasing business XL Group; and Morses Club announced the acquisition of the business and assets of Eccles Savings & Loans, a family-run home collected credit lender with loan balances of c. £1.4m.