Platform M&A activity has been bubbly of late in the UK and Europe, prompting questions on platform valuations.
In continental Europe, MiFID II’s complexities will boost outsourcing. Allfunds is expanding rapidly on the back of this and FNZ’s acquisition of ebase is seen favourably by UK clients with businesses beyond the Channel.
Inversis, the number two platform in Spain, is looking for a strategic partner to fund expansion that’s being fuelled by MiFID II. We hear that there are 50 potential suitors.
UK’s True Potential will hope for as much interest in its sale. It is seeking a higher valuation multiple by positioning itself as more of a technology play than it has been with SEI as its technology provider. Who wouldn’t want a fintech rating following FNZ’s £1.65bn valuation last week – after Caisse de Depot et Placement du Quebec and Generation IM acquired the stakes of General Atlantic and HIG Capital?
Opportunities are also opening up for platforms and other wealth tech in the gateway markets for international funds in Asia which we cover in our new Asian Fund Distribution report. Fee-based advice is gaining some traction in Hong Kong and Singapore – and local wealth managers are telling us that they would switch to a premium UK service like Transact if it was available.
“It’s the tech that allows you to focus on low-cost products and fee transparency” said the founder of a large adviser firm for expats who says he would swap instantly.
However, it’s important to disentangle the different elements within these businesses to measure their overall value. Wealth tech can mean high margins and high multiples, but fund administration mostly means low margins and low multiples. Most of the platforms and tech providers are hybrids but hoping you won’t notice.
The key is to create a differentiated service that is scalable and hard to replicate. Allfunds, Hargreaves Lansdown and Transact have all achieved that but with proprietary technology, earning them their ‘wealth tech’ wings and associated valuation multiples.