If you are involved in the asset and wealth management sector in any way you almost certainly will have noticed that private equity is interested in getting its slice of the pie and more so than ever before.
For anyone who was unsure whether this interest in the market was a one-off or whether it was a real trend, the publication of the Echelon Partners report last year should have been conclusive evidence: private equity likes this sector.
With private equity involved in two-thirds of the deal activity in this sector, and with that interest having continued into this year, you could say that private equity is here to stay.
The interest in asset management should not really surprise any long-term watchers of the private equity market, as it has a number of hallmarks and factors that make it look like a sector ripe for interest from private equity including:
With this number of factors coalescing, it is no surprise that there has been an increase in appetite of private equity firms looking to participate in deals in this space.
If you are the owner or an executive of an asset manager and the call comes in to you, there are some things to consider when deciding if a private equity exit is right for you.
As an adviser in this space, I would suggest that these questions should be on your mind if approached:
This is undoubtedly going to remain an active market and a continued focus for private equity.
The industry itself is large enough and still fragmented enough for a number of deals to be done and to continue to be done in the future.
I suspect the next interesting areas to watch and consider will be whether there are any clear winners in the market that can create trust, confidence and a brand that will give them a competitive edge when looking to acquire or invest in wealth management (and then lead to increasing market share as a result of that consolidation and brand).
Also, what will be the next phase in the market itself? With private equity generally having a three to five-year horizon for investments, what will their exit route be?
Will we see an increase in secondary buyouts? Will we see more IPOs in the space?
Regardless of the answers to the above, it is going to be a sector that remains ripe for opportunities and an interesting one to be involved in and I will be watching eagerly to see how it all plays out.
Stuart Hatcher is a partner in Forsters’ corporate team