Financial services sector in transition prompts spike in demand for M&A skills

Jeff Singh

Sweeping legislative change, rising equity markets and interest from US private equity groups has seen ownership structures in Australian financial services in a state of flux, with the effect felt most keenly at the mid-market level.

These are comments from Jeff Singh, Principal and Managing Director of Chase Corporate Advisory, who pointed to the recent surge in mergers and acquisitions among mid-tier accounting, financial advice and funds management firms as evidence of widespread structural change across the industry.

“There are a number of reasons for the increased activity, but the falling Aussie dollar, rising equity market and significant legislative change are chief among them.

“US private equity firms eager to get a foothold in the Australian financial services sector see real opportunities at the moment, and they are aggressively pursuing an acquisition agenda,” Mr Singh explained.

Mr Singh then said that that the funds management sector is also playing a significant role when it comes to increased activity.

“Fund managers know that they must evolve and grow if they are to continue to remain competitive and keep their slice of the investment market. Particularly as the great big pool of superannuation money grows ever larger.

“We are seeing fund managers take steps to identify boutiques which they can incubate and develop, with an eye to improving distribution on and offshore, as well as diversifying their income streams,” he said.

Mr Singh went on to say that demand for specialist advice has increased markedly as a consequence of changes in the industry, because good advice can make the difference between a successful and an unsuccessful transaction.

“Financial services firms looking at buying, selling or merging their businesses understand that they need advisory firms which specialise in the mid-market level, and which can advise at every stage of the process, from origination of deals, right through to due diligence and execution.

“Chase is one of the few specialists in this area, and as a result we have been overwhelmed by demand for our services. Our pipeline is now in the order of $20 billion in FUA/FUM, something we have never experienced before.

At the smaller end of our deal book, we advised on the sale of Certitude Global Investments to Ironbark Asset Management this week, but our recent transactions are often much larger and more complex, such as the $200 million sale of Crowe Horwath, a listed company, to the non-listed Findex Group,” Mr Singh said.

In conclusion, Mr Singh said that there was no question that changes to legislation, combined with strong performance from equity markets has heralded widespread structural change in the financial services sector, with significant consequences for all players in the market.

“In a market where the only constant is change, it’s really important that financial services firms make use of professional, high quality advice if they are to make the right decisions and remain competitive,” Mr Singh said.