Funding and Deals of Note in Wealth, Banking, and Asset Management from Aug 4th to Aug 11th.

Overview: ?The last week was an interesting one in terms of both announced deals as well as in new funding.? While there may continue to be notable challenges in the earlier stages of funding continuing to be seen there remain underlying trends that are supporting capital movement into the sectors that I cover.? These can be summarized as follows

1.??????? PE firms, both directly and through invested vehicles continue to see the opportunity to generate returns through platform consolidation and scale.? While there are still two significant challenges, balance sheet interest costs on borrowings, and technology and operational integration to be considered, the larger macro drivers present that portend wider social needs for advisory services, along with a broader array of investment and planning solutions, are continuing to support both primary and secondary capital flows, esp. in the US and UK.

2.??????? Venture Capital and Growth Equity continue to support maturing businesses that are starting to demonstrate an ability to deliver AI enriched platforms to different types of wealth, and protection intermediaries. ??This seems to be driven by an increased belief that while data management has been a significant impediment in the past for firms that are seeking to create operational and business leverage from their client, and transactional data and processes, with the advances that GenAI and LLM tools are making in these areas, we are finally reaching a positive tipping point in the cost/benefit of tackling this problem, which in turn promises improvement in profitability for advisory businesses and their related product providers.

3.??????? With many investors focused on investing in both private and public companies that are advocating and delivering growth efficiency metrics, board rooms are increasingly asking their management teams to jettison businesses that were both marginal to their core proposition, and potentially liable to creating reputational or operational challenges in the future. ??While some of these exits are being executed to financial sponsors, many are also contributing to further consolidating access to certain types of products in financial markets, particularly those that are operating with very low margins, and are volume led in relation to their sustainability on the balance sheet.

All of these above themes in one way or another figure in the deals and funding for the past week so without further ado, let’s go through the transactions themselves that caught my attention.

Deals

1.??????? UK: CVC Consortium intends to take Hargreave Lansdowne Private / https://financefeeds.com/cvc-consortium-to-acquire-hargreaves-lansdown-for-5-4-billion/

There has already been a lot said about this deal, but for me the most notable element of it was the fact that management at HL have effectively admitted that without this transaction, they will not be able to keep pace with creating the type of wealth, investing and brokerage market that they perceive the market needs.?? It is not a secret that HL have been struggling to successfully modernize their internal, proprietary technology and operational platform, which is primarily supported through onshore resources in the Southwest of England, so it will be interesting to see what the new owners, working with the management team decide to do here, not only in terms of tackling the problem, but also in relation to the makeup of the management team, organizational design, and 3rd party collaborators.

2.??????? USA: Creative Planning looking at primary and secondary share sale opportunity / https://citywire.com/ria/news/creative-planning-pursuing-capital-raise-up-to-4bn-sources/a2447935

The news here is that Creative Planning is looking at a capital raise to both help out one of its existing shareholders, who is seeking some liquidity, as well as find a new partner to help it scale further, perhaps internationally with its wealth advisory ambitions. There have been a lot of rumours circulating that many platform builders are seeking to raise capital and realize some value from their particular approaches toward creating wealth advisory scale, so one wonders whether we are heading for a shift in the valuation of these businesses, perhaps with regulatory cost adjustments acting as a headwind to future profitability, even with both longevity trends, and new generational wealth accumulation both continuing to provide positive tailwinds.

3.??????? UK: Natwest to buy most of the banking business of Sainsbury / https://uk.news.yahoo.com/uk-supermarket-sainsburys-sell-banking-061708740.html

First there was Tesco Bank, now Sainsbury, looking to exit most of its banking business operations. FS once seemed to promise a new profitable business line for supermarket retailers, but while, perhaps for Sainsbury, given its continuing ownership of Argos, there is some interest in retaining unsecured lending, core banking and the demands of consumer duty seem to have been too much of a burden, for it to retain its more traditional and highly competitive banking business lines.? In the scheme of things it is a small deal for Natwest but it does perhaps give it access to some further interesting clients in the mid-market for more traditional and simple mortgage, savings and investment products with acceptable lifetime values.

4.??????? Singapore: Temasek Trust to acquire advisory assets of MoneyOwl / https://sg.finance.yahoo.com/news/temasek-trust-to-acquire-moneyowl-following-announcement-to-wind-down-its-business-104446002.html

Temasek Trust are taking on the task of ensuring that the good work that MoneyOwl had done in advancing financial literacy and guidance in Singapore to the broader population does not go to waste.? There was a substantial amount of highly useful educational digital assets built by Moneyowl that may actually have wider usefulness than just to the younger generation that the company had been targeting too, so while this isn’t a transaction driven by financial incentives, it does preserve some very important knowledge and know how for Singapore society to retain, use and enhance.

5.??????? Switzerland: UBP to buy the Private Banking assets in the UK and Switzerland of Societe Generale https://iclg.com/news/21228-ubp-to-acquire-top-bank-s-private-banking-operations-in-the-uk-and-channel-islands

Societe Generale has been a bank under pressure to improve its balance sheet in the past two years, and the sale of SG Hambros Kleinwort that operates in the UK and Offshore Channel Islands as well as its Swiss operations is a further step in this process. I find it somewhat surprising that what should have been one of its more profitable business lines, i.e., private banking has fallen under the hammer, but one also needs to sell assets that other financial institutions or sponsors actually want. UBP is boosting its asset base by around 17% from this deal and acquiring a significant uplift in its UK presence, so it is a further sign of its ambitions, but will also bring IT and Operational challenges of its own given the way that the UK was always trying to operate at arm’s length from Paris, and the Swiss operation did not get the attention it perhaps warranted.

6.??????? France: BNP Paribas negotiating to buy AXA IM from AXA Insurance / https://www.moneymanagement.com.au/news/funds-management/bnp-paribas-looks-acquire-axa-ims-eu850bn-investment-arm

Clearly if one isn’t managing a trillion plus of assets, it is not possible to operate as a global multi-functional asset management company, and this deal only further underscores this view. It also shows that while insurance companies certainly need asset management services, and thus will build substantial organizations to manage their insurance premiums, there are potentially different ways to acquire these services, rather than just creating vertically integrated organizations to do so. While this might have management consultants visiting Aviva, and Allianz and some of the others that could take a similar path, the marriage between BNP and Axa, both French companies, and with very different types of investment management capabilities does not immediately seem like one easily replicated in other jurisdictions. BNP will gain a lot of experience and scale in different alternatives, such as real estate and infrastructure, while AXA realizes a return on its investment and is able to consume services from a multi-asset provider more cheaply.

7.??????? Germany&Switzerland: Pollen Street Capital to acquire ETOPS AG / https://www.finews.ch/news/finanzplatz/63831-etops-group-wealth-tech-europa-pollen-street-capital-zug

This is the first significant deal that Pollen Street has done since it began to conceive of building a wealth platform that serves the entirety of the DACH region and all of the different intermediaries and wealth service providers in it. Prior to this deal, Pollen Street was primarily looking to consolidate its German platform across wealth, insurance, and advisory services, so buying ETOPs, which itself has been constructing a different sort of platform for wealth managers is an interesting move, and potentially a more transformative one in terms of the size, shape and capabilities of the group. It also creates an organization that would be more interesting as a launch pad for Harvest Software DACH ambitions.

8.??????? UK&Australia: Fidelity to acquire Perpetual Licence from Bravura/ https://www.moneymarketing.co.uk/news/fidelity-international-pays-29m-to-operate-bravuras-sonata-platform/

Fidelity is the type of client that will always have this type of buyout clause in their agreement, and is more likely than most to execute it. Bravura and Fidelity, as I understand it, have flirted with this idea before, but perhaps now, after the selloff in the share price led to some significant internal unrest and change, Fidelity have concluded they need to exert their need for control through this approach.? It is hard to see this as a long term vote of confidence in Bravura itself, but at least it does evidence that in Sonata itself, Fidelity sees a future that rivals what was built in house for the US and Canadian markets.

Funding

1.??????? USA: Savvy Money – Series A / https://thepaypers.com/online-mobile-banking/savvy-wealth-secures-usd-155-million-in-series-a-round--1269510#

As I mentioned at the outset, with this latest raise, Savvy has been given a vote of confidence that its focus on creating an integrated platform that can deliver significant operational benefits to the front and middle office has the ability to scale and generate substantial ARR, not only from small firms, but more importantly from the larger mid-market and networks that run hybrid advisors. ?This is probably the largest funding round that has been seen within this particular part of the value chain, and is an early indication of the excitement that AI tooling as augmentative

2.??????? Singapore: Endowus – Institutional Round/ https://sg.finance.yahoo.com/news/endowus-raises-us-35-mil-154500032.html

Endowus received a further vote of confidence in its digital private banking model in its latest institutional raise with new investment from the venture arms of Citi and MUFG. ?The raise underscores the fact that in the APAC region, wealthier individuals haven’t had much legitimate alternative to using the private banking arms of the foreign and large local/regional players, and even then have often had significant limitations imposed on them when it comes to access to a broad, neutral, non-bank sponsored product range.? Endowus is one of the few scalable players emerging as a hybrid private banking/wealth managers who offers this along with a digital first, relationship management support model, with both contributing to a significant lower fee structure as well as lower liquidity entry point, suitable to target next generational wealth recipients early in their evolution.

3.??????? USA: Naaya – Strategic Investment / https://coverager.com/adp-ventures-invests-in-nayya/

ADP Ventures has extended and upgraded its relationship with employment benefits platform provider Nayya. Nayya offers a highly end user centric approach toward employment benefits, combining a high level of personalization with an increasing intelligent recommendation and selection engine, augmented by AI capabilities in terms of both understanding needs as well as helping end users determine the most suitable benefits to meet an evolving lifestyle. ADP has a very significant footprint in payroll services, as well as pension processing, and thus has recognized the way that Nayya can supplement and enhance its own revenue streams. Often fintech firms would operate at arms-length with a provider like ADP to make sure it can maximize its own market share, so clearly the two organizations must have a significant overlapping footprint to address.

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