Following an active 2024, private equity sponsors are expected to deploy the record US$2.62 trillion of uninvested capital that accumulated globally during a period of subdued deal activity.
Diverse opportunities within financial services, including digital transformation and consolidation, are expected to drive continued deal flow as PE firms seek to leverage the sector’s growth potential.
According to recent analysis published by global law firm Ashurst, subsectors of interest this year will include wealth management, with PE players particularly attracted to platforms they can buy at entry multiples and leverage their digital know-how to boost customer retention and streamline operations.
A recent example from Australia highlights this trend, with news emerging just over a week ago that Bain Capital is re-entering a bidding war to acquire Insignia Financial.
Insignia, which recently outlined its strategy to become Australia’s leading and most efficient wealth management company by 2030, has seen fierce competition from global PE firms, with Bain Capital going head-to-head with CC Capital Partners to acquire the company.
Before the commotion surrounding Insignia unfolded, Oaktree Capital Management made its mark with a $240 million acquisition of AZ NGA.
But the trend of PE interest in Australian wealth management is not limited to Insignia and AZ NGA, with Bravura recently flagged as a potential target after a period of successful recalibration and turnaround.
Peter Worn, joint managing director of Finura, predicted that the “great privatisation of wealth” will continue to gain momentum.
Speaking on a recent webinar, Worn said the interest received by Insignia and AZ NGA “should signal to a lot of people that Australian wealth management is a really great business to be in, that people want to put huge amounts of capital into for the future”.
“We have a lot of participants now looking to invest in financial planning businesses and there’s a lot of really good reasons why they want to do that.”
Looking ahead, Finura anticipates that PE firms will also target companies such as AMP, Iress and Praemium.
“It’s highly logical that anyone who’s thinking about acquiring Insignia would also look at a business like AMP and see a lot of potential there as well as a private company,” he said.
Ashurst further highlighted that financial advice businesses, even those that are founder-led, are becoming increasingly attractive to private equity as founders approach retirement and seek liquidity.
“PE buyouts offer this liquidity, as well as the capital to incentivise the next generation with sweet equity,” the firm added.
