Investment platform dynamics highlight focus on M&A in New Zealand

atform dynamics are drawing attention to mergers and acquisitions in the investment space in New Zealand. An analysis conducted by Clare Capital, a managing partner at the capital firm, sheds light on the changing landscape of direct-to-consumer investment platforms in the country.

The study revealed that the direct-to-consumer investment platform market in NZ is becoming increasingly crowded and is ripe for consolidation, with valuations varying widely across different platforms. While Kernel was valued at $42 million, Sharesies commanded a valuation of $450 million, showcasing the diverse range of valuations in the market.

The analysis also highlighted the concept of ‘enterprise value’ (EV) and its significance in investment platform deals. In the US and Australia, EV compared to assets under administration paints a varied picture, ranging from 30.6% for eToro to 0.1% for Envestnet.

Recent transactions in the industry have seen US private equity firm Bain Capital acquiring Envestment for $4.5 billion, underscoring the substantial value of assets under administration. Australian platforms like Spaceship and Selfwealth have also changed hands, with valuations based on a ratio of EV to AUA.

In New Zealand, platforms like Hatch Invest and InvestNow have undergone ownership transitions, with Hatch’s value doubling in just one year in a joint venture deal with Jarden Direct. The need for consolidation in the competitive landscape of NZ’s investment platforms is becoming increasingly apparent, as firms seek economies of scale and strategic partnerships to strengthen their market position.

Valuations of investment platforms are influenced by various factors, including business models and user numbers. Sharesies and Hatch, with the highest number of accounts, reported lower average balances compared to InvestNow and Kernel, which boasted higher average balances but fewer account numbers.

Each of the main NZ-based platforms has adopted a unique approach to investing, with InvestNow focusing on managed funds and term deposits, Kernel on index products, Hatch on US equities, and Sharesies on a broader range of share-trading options. The market has also seen some convergence, with platforms expanding their services to include KiwiSaver schemes and direct share-trading options.

The influx of global investment platforms with scalable technology into the Australasian market poses a threat to local firms, who may face margin pressures in the face of increased competition. New Zealand is likely to witness a wave of merger and acquisition activity as local platforms seek to align with global trends in the investment space. Clare Capital, with its expertise in the industry, foresees a future of consolidation and strategic partnerships shaping the landscape of investment platforms in New Zealand.