Standard Life Aberdeen announced over the weekend that it was putting Parmenion up for sale. News then broke on Wednesday that Nucleus had already received some proposals. Parmenion and Nucleus are two very different propositions, and they present very different opportunities for whoever ends up acquiring them.
First let’s tackle Parmenion…
Arguably, any acquirer would be getting first-and-foremost a DFM with platform/technology capabilities rather than a platform with distribution potential. So it’s not immediately clear who a potential buyer could be.
- Private equity firms have always shown great interest in this sector so they can’t be ruled out.
- Other wealth managers might show interest. Many are looking to the adviser market for growth and would likely be attracted to the adviser relationships as well as the assets. However, we expect most to balk at the price tag.
- Another platform makes little sense as there is little scope for efficiencies or economies of scale. Any platform would probably struggle to integrate Parmenion into its own proposition.
- An asset manager also seems to be an improbable candidate. It would face similar struggles to SLA. Why own a DFM/platform, which would provide few opportunities to distribute your own funds? However, owning Parmenion might benefit any asset manager who fancies getting into discretionary portfolio management.
Nucleus might present broader appeal to more groups…
The Nucleus IPO has not delivered as much value to shareholders as those of Transact or AJ Bell. Sanlam’s desire to offload its 52% stake seems to have acted as the catalyst for the sale. Epiris (the private equity parent of James Hay), Transact and Allfunds have all been mooted as potential buyers. Aquiline Capital Partners (another private equity firm with a keen interest in small-to-medium fintech firms) was also in discussions but announced yesterday that it doesn’t intend to make an offer.
Both Epiris and Transact would be consolidation plays.
- Epiris has been at the wheel of James Hay for just over a year and probably sees Nucleus as a strong base for expansion.
- Transact would instead be looking at inorganic growth to deliver value to its shareholders – Nucleus’ users would present a good fit with Transact’s philosophy and other users.
- Allfunds has significant market share in the European institutional platform market. An acquisition would mark a move into UK adviser platform territory. It is owned by a mixture of private equity and European banking groups, and its own IPO is expected shortly.
But the clock is ticking – that much is clear now that the news has broken. Advisers are often hesitant to place new business on a platform where question marks remain over future ownership, so we hope that both of these sale processes progress quickly and that advisers and clients won’t be left in limbo.