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Watchdog pushes forward with FNZ, GBST merger probe

Watchdog pushes forward with FNZ, GBST merger probe

The competition watchdog has pushed forward with its probe into the merger of two platform technology companies, appointing an inquiry group to conduct an in-depth investigation into the acquisition.

The Competition and Markets Authority announced today (April 16) it had selected four CMA panellists to conduct a ‘phase two’ investigation into FNZ’s binding agreement to take over GBST.

Last month (March 30) the watchdog raised a number of red flags over the merger after finding the move could lead to “higher prices, fewer options and less innovation” in the retail platform market and that the two companies were “close competitors” in a “concentrated market”.

At the time FNZ was given five working days to address the CMA’s concerns and was told if it did not respond in time or convince the watchdog the merger was viable, it would conduct a more in-depth investigation.

Today, Martin Coleman, Colleen Keck, John Thanassoulis and Humphrey Battock have been appointed to lead such an investigation, which must be completed by September 2020.

FNZ and GBST — two of the three major tech providers for UK adviser platforms — had agreed a buyout worth £220m last summer but the watchdog began investigating the agreement in November 2019.

The number of companies involved in back-office platform technology is small, with GBST, FNZ and Bravura providing the technology for 71 per cent of the assets under management in the platform space, according to investment bank Liberum.

During its investigation, the CMA found smaller or less well-established firms found it difficult to enter the market or scale up because of the risks and reluctance from customers to change suppliers.

It also found FNZ had a particularly strong position in the supply of platform tech servicing and that GBST was one of only a few rivals that exerted a competitive constraint on FNZ in this remit.

The CMA believes customers of FNZ and GBST — such as Old Mutual and Aegon — could be left in a weak negotiating position due to the lack of credible alternatives and this could result in price rises and a reduction in quality.

imogen.tew@ft.com

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