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M&A in the wealth management industry is up as valuations slide, according to research

by Eleanor Lawrie on Dec 17, 2013 at 10:57

M&A in the wealth management industry is up as valuations slide, according to research

Merger and acquisition activity in the global wealth management industry rose in 2013, while valuations slid, leading to suggestions they could soon hit a floor.

More than 60 deals took place this year, and the UK was the most active participant, with 25 deals involving independent financial advisory (IFA) business models.

But valuations were down, according to information compiled by wealth management consultantsScorpio Partnership, which estimated that the average price relative to assets under management had fallen to 1.22%.

'The M&A tempo has reached a new level. Most deals appear to be pursuing scale with the cost of doing business surging for many while the income levels are still under pressure,' said Sebastian Dovey, managing partner at the company.

'Notably, with valuations falling to a record low, we have seen more private equity firms taking active stakes in the market.'

Dovey added that the research raised the question of how much further valuations could fall.

'Our view is that 1.22% may be running close to the baseline with some higher quality deals still securing a premium,' he argued.


1 comment so far. Why not have your say?


Dec 17, 2013 at 16:36

Trouble is that 1.22% equates to 2.5% after you have allowed for the additional IT, compliance, staff bonuses and loss of accounts. Obviously, if you want to be seen as an aggressive hero for the year, then make an acquisition. For the long term MD then even allowing for some economies of scale, they still do not make sense. Luckily, no one has told the private equity firms who simply don't seem to understand the vast add-on costs from making an acquisition.

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