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More acquisitions expected as regulation bites

More acquisitions expected as regulation bites

The number of acquisitions in the advice sector are expected to continue to increase as sizeable sellers enter the market and the burden of regulation begins to bite. 

The first half of 2019 has witnessed an acquisitions market seemingly undeterred by the political uncertainty of Brexit, with large players the likes of Quilter leading the charge for buyer demand. 

Last week Quilter added £211m in assets under management to its national advice business with three acquisitions in the south east of England and earlier in the month completed its £46.2m purchase of national advice company and network Lighthouse, gaining 400 advisers in the process. 

The flurry of activity is one Stuart Dyer, chairman of introducer Soprano Mergers and Acquisitions, predicts will continue over the coming years with an increase in both supply and demand for consolidation of all sizes in the market. 

Mr Dyer said: "We’re seeing a heck of a lot of activity at the moment, we are talking to a large number of potential sellers and I think we are seeing two things.

"First of all there are some people who have almost reached the end of their tether and are looking to get out now, but we’re also talking to a number of businesses where they are still trading profitably and providing good advice - good sound businesses, but they’ve made the decision that over the next couple of years they will be looking to exit."

Mr Dyer, who formerly joined Cofunds as its chief executive in 2001, said demographics and succession planning had a popular part to play in the number of acquisition deals coming to fruition in the market. 

The owners of Windsor-based Petrus Financial Services and Surrey-based ROC Consultants, two of the firms most recently bought by Quilter Private Client Advisers, are set to retire once their clients have been transferred to Quilter. 

But the burden of regulation is also encouraging advisers to consider selling their business, Mr Dyer said.

He believes the Markets in Financial Instruments Directive and the Senior Managers and Certification Regime, due to be implemented in the advice market later this year, had been "shaking up the market". 

He said: "It is very tough out there to deal with the wave of regulation which is coming down on advisers.

"Just dealing with the administrative complexities, and some of the processes which they are now having to deal with, are proving very difficult.

"So I think we’re certainly going to see greater activity, we can feel it. We’re talking to a lot of potential sellers and there are buyers waiting."

Mr Dyer said he expects to see any further consolidation happen at a "much faster pace" than that seen in recent years. 

Soprano is also anticipating growing private equity participation in the acquisitions market, having already witnessed a significant interest from private equity buyers which Mr Dyer expects will create "additional demand" for advice businesses.