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Building M&A success in financial services sector

Following on from recent acquisition announcements by our investee, Broadstone, Xavier Woodward looks at what is driving M&A in the financial services space and how to deliver it successfully.

“Looking at the pensions and employee benefits sector, it has all the trademarks of a space with considerable M&A promise, as it is highly fragmented due to a history of smaller companies offering regional or niche services. With a large addressable market of SME and Enterprise businesses, there is a fantastic opportunity for businesses that have built a scalable platform - such as our investee Broadstone - to pursue a measured but aggressive buy and build plan. 

Across the financial services landscape many smaller operators are struggling to compete in the current landscape that is seeing increased regulation and a shortage of talent. The shelter of a larger group allows them to continue to deliver services to clients whilst gaining the advantages of being under a market-leading brand and the associated infrastructure. M&A also provides the acquirer with access to clients and a route into new geographies and sectors at an accelerated pace. 

 

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In this climate the harder challenge is how to ensure that the strategy is delivered successfully. Successful M&A integrates acquired businesses into the parent company so that the group has a coherent product proposition. It is important when assessing targets to understand how their offering enhances and sits alongside your own, and what the strategy is for areas where it doesn’t.  

Given the importance of people in financial services, it is also crucial to make sure a group-wide culture is maintained. This can often be the most difficult thing to get right but creating a plan before the ink is dry will have a big impact on being able to retain staff across the platform and will ensure clients feel a seamless transition that reduces churn to a minimum. 

 

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As a financially regulated space it is all important to get this integration right to build the right compliance culture across the broader business. If you look at the likes of Broadstone, which has delivered three acquisitions already this year, a top priority has been bringing compliance procedures in line across the group and maintaining the high standards that has enabled such fantastic growth so far.” 

To discuss how an M&A strategy could benefit your financial services business, please contact investments@livingbridge.com