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Has the advice market reached peak M&A?

Has the advice market reached peak M&A?

The number of mergers and acquisitions in the advice market surged by 50 per cent during 2021, with a surge in the number of start-up consolidators popping up, according to guests on the latest edition of the FTAdviser Podcast.

But Heather Hopkins, managing director at NextWealth, questioned whether M&A activity in the advice market had peaked.

She said: “Our view at NextWealth is that actually the pace of consolidation of the financial adviser market might be tailing off because we're hearing from some brokers and consultants, the number of new firms contacting them looking to sell has really dried up but there's loads of firms looking to buy.”

Hopkins explained that the figure and multiples being paid have been really well reported and so firms know what they can get “if they haven't been that carrot yet, or they're looking to sell”. 

She said: “The volume we've seen over the last couple of years - I don't see that as sustainable, looking forward and I think the front is actually more focused on organic growth now.”

But Louise Jeffreys, managing director at Gunner & Co, said: “I think this question around what's in the pipeline is really key because actually the time it takes to do a deal, certainly firm analysis, is significant. And so deals aren't happening, they're not starting and completing within three, four or five months and I find that business owners are often brewing and to a degree building their exit strategies for years.”

She explained that the start-up consolidator market is here to stay. 

“Predominantly, they're looking to grow to a significant size to look at listings - that is what they typically talk about and I don't think all of that all of those will happen and I think there will be consolidation of a number of those buyers as they get to sort of £4,5,6,7bn under management.”

Jeffreys said the total volume of transactions was unsurprisingly up during 2021, with a 50 per cent increase year on year.

This came off the back of a 19 per cent reduction of total volume of deals for 2020, but even so 2021 volumes were up 21 per cent on 2019 numbers.

She said: “We've got these new buyers entering the market that are opening up markets for business owners that might not have sold in the past, which I think is driving some of that transaction growth but it is non-stop.”

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sonia.rach@ft.com

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