Value of mergers and acquisitions increases despite slowing acquisition activity

The pace of mergers and acquisitions in the advisory sector experienced a slight decline in 2024, with 127 deals publicly announced, as opposed to 134 in the previous year, according to research conducted by NextWealth. However, the study discovered that the value of these deals saw a significant increase, largely due to the acquisition of numerous firms with assets totaling more than £1 billion by companies like Titan Wealth. NextWealth’s third annual report on consolidators and aggregators, which was released on April 3rd, highlights how merger and acquisition activities are continuously reshaping the financial advisory landscape in the UK.

The report indicates that the expenses associated with acquiring firms have doubled since 2021, rising from 3-6 times Ebitda in 2021 to 6-12 times Ebitda in 2024. This trend is anticipated to persist in the future. The report also observed that there are more than 30 private equity firms invested in financial entities, suggesting a sustained interest from private equity in financial services. Overall, 2024 proved to be a robust year for acquisitions, particularly in the latter half.

NextWealth forecasts a promising start to 2025, with comparable deal numbers to previous years. The firm anticipates a substantial pipeline of new acquisitions for the second and third quarters of the year. However, they caution that reviews by the Financial Conduct Authority on consolidation and ongoing advice may potentially dampen the volume of deals moving forward.

The latest report from NextWealth incorporated profiles of 25 acquirers who have made significant acquisitions over the past four years. The analysis included an assessment of whether firms possess in-house capabilities across various functions such as platform management, fund management, portfolio management, technology, and professional services. Among the profiles assessed, 84% of firms had in-house model portfolio services, while 68% offered an in-house range of funds. Many of these firms indicated a current focus on upgrading their centralised investment proposition (CIP) and expressed openness to collaborating with investment partners to develop in-house fund and portfolio ranges.

Heather Hopkins, the managing director at NextWealth, predicts that the trends seen in 2024 will persist over the next 12 months, with a decline in the number of deals but an increase in deal value. She foresees a growing number of private equity firms seeking to divest their positions and expects to observe a rise in the consolidation of consolidators. Interviews with consolidators indicated a healthy pipeline of acquisition targets, suggesting that this trend will continue to reshape the UK wealth market.