KBS - Financial Services and Wealth Management - Market Insight

MARKET INSIGHT – FINANCIAL SERVICES AND WEALTH MANAGEMENT

M&A ACTIVITY CONTINUES TO RISE WITHIN THE WEALTH MANAGEMENT INDUSTRY The UK financial services and wealth management market is on a trajectory of continued growth. This sector comprises companies that provide financial planning, investment management, banking, insurance, retirement planning, tax advisory and estate planning services to individuals, families and businesses. Firms range from independent financial advisers (IFAs) and boutique wealth managers to large asset management firms, private banks and financial technology (fintech) companies. The sector is driven by rising global wealth, demographic shifts (e.g. ageing populations), regulatory changes and increasing client demand for personalised financial solutions. The expansion of fintech, robo-advisers and digital banking is also transforming the industry, making financial services more accessible and efficient. KBS Corporate’s extensive experience in managing successful transactions, allied to our ongoing engagement within this dynamic market, has provided us with a unique perspective. We have conducted an in-depth analysis of the company sales landscape within this sector, offering valuable insights into the key trends shaping sales activity. This includes the strategic moves of leading acquirers and the vital role of private equity in driving industry consolidation. We present significant industry transactions, highlighting notable deals and market dynamics that are reshaping the competitive landscape - along with a detailed overview of completed transactions facilitated by KBS Corporate - offering a practical look into real-world M&A examples within the financial services and wealth management space.

CURRENT LANDSCAPE UK individuals currently have approximately £3.3tn in liquid investable assets and the industry is predicted to grow at a CAGR of 7%. The amount of assets overseen by wealth managers grew by 17% between 2020 and 2023. In 2024, mergers and acquisitions activity in the UK financial services sector rose significantly, marking a 26% year-on-year increase in deal volumes and reaching the highest annual level since 2012. UK wealth and asset management deals increased from 107 in 2023 to 122 in 2024, with the total publicly disclosed deal value rising substantially from £2.1bn in 2023 to £9.3bn in 2024. UK firms acquired 97 overseas targets in 2024, an increase from 65 in 2023, although the total deal value remained stable at £1.7bn. Non-UK firms acquired 74 UK companies, an increase from 54 in 2023, although total deal value dropped to £3.9bn. Regulations play a pivotal role in asset management. The Consumer Duty was introduced in June 2023 by the FCA (Financial Conduct Authority). This has put pressure on smaller firms, due to high compliance costs, to sell their businesses to larger ones, increasing M&A activity.

UK individuals currently have approximately £3.3tn in liquid investable assets and the industry is predicted to grow at a CAGR of 7%.

KEY TRENDS

+ REGULATION New regulations, e.g. The Consumer Duty, have increased governmental regulatory pressure, presenting challenges for wealth management firms. In the UK, 13% more advisers have stated compliance has become significantly more challenging compared to 2023 (source: RSMR). Complying with heightened regulatory expectations requires operational changes, making acquisitions/consolidations an attractive alternative. Moreover, smaller companies may not have the capital to fund the cost of building/ upgrading current systems. M&A creates a way for them to access new technologies. In the US, financial deregulation is expected to be omnipresent under the Trump administration, which may mean M&A will be much easier in the US. European regulators may in turn face increased pressure to relax or delay financial regulations. Therefore, regional differences are expected to arise, impacting cross-border M&A. + CONSOLIDATION Larger asset and wealth management firms are expected to continue acquiring companies to achieve scale, diversify products and expand into other regions. Firms are focused on specific capabilities and technologies which drive further investment. These include crypto, blockchain, tokenisation and sustainable investing. + EXPANDING PRODUCT AND SERVICE OFFERINGS Wealth management firms are seeking alternative products to broaden their service offerings, especially those which are customer centric, personalised, improve customer satisfaction and meet the expectations of the modern customer. Moreover, firms will expand their personalisation of products/services targeted at high-net-worth individuals. A PWC survey found that two thirds of respondents want more personalisation in their wealth management relationships, especially in financial planning and investment strategy.

This can be achieved by implementing ‘next best actions’ capabilities for important milestones in the client’s life, with CRM systems that remind advisers to contact clients or by triggering automatic communications.

KEY DRIVERS AND MOTIVATIONS FOR ACQUIRERS

+ SKILL SEEKING

• In a recent PWC survey, which asked asset and wealth managers their motivation for pursuing an M&A strategy, the dominant response related to gaining access to skilled expertise at 73%.

Deal-making will be driven primarily by skills seeking

Gain Access to skilled expertise

73%

Increase operatioal efficiency

69%

Expand market reach and penetration by leveraging strengths and capabilities

60%

Accelerate product development and time-to-market for innovative solutions

50%

Reducing costs through shared infrastructure and resources

29%

Enhancing customer experience and engagement

29%

Facilitate access to cutting-edge technology

28%

Leverage data analytics and artificial intelligence to improve investment decision-making processes

23%

Question (asset managers who said they were considering or likely to pirsue M&A): What are the factors motivating your firm to pursue a strategic partnership/consolidation/M&A in the coming 12-24 months? Source: PwC Global AWM & ESG Research Centre

• One third of firms stated that currently they lack relevant skills and talent.

• Only 39% of wealth managers are upskilling their internal workforce to leverage new technologies, e.g. training and prompting AI and the ability to harness open-source technology. However, PWC’s Global Workforce Survey showcased that employees are eager to acquire and develop new tech-focused skills. + INCREASING OPERATIONAL EFFICIENCY The second most popular reason for pursuing M&A was to increase operational efficiency. Investment firms Morgan Stanley and BlackRock acquired Parametric and Aperio respectively to bolster their SMA capabilities. These allow for vertical extension of product and service lines. This is intended to increase revenues while satisfying customer preferences. Moreover, this vertical extension will mitigate strategic and financial risks. + EXPANDING CLIENT BASE AND GEOGRAPHIC REACH M&A in the wealth management sector is driven by firms seeking to expand into other geographic regions and accessing a new client basis. Acquisitions allow for market penetration at a much faster rate than organic growth.

EBITDA MULTIPLE RANGES IN THE FINANCIAL SERVICES AND WEALTH MANAGEMENT SECTOR In the UK and global financial services and wealth management sector, EBITDA multiples for company sales typically range from 6x to 18x, depending on the firm’s assets under management (AUM), fee structure, client base and level of recurring revenue. Key valuation trends include: • Wealth Management & Investment Advisory Firms: Businesses managing investments for high-net-worth individuals (HNWIs) and institutions typically trade at 10x-18x multiples, with premium valuations for firms with long-term discretionary mandates.

• Independent Financial Advisers (IFAs): Smaller advisory firms tend to see 6x-12x multiples, with higher valuations for those with fee-based revenue models and strong client retention.

• Private Banking and Family Offices: Firms catering to ultra-high-net-worth clients (UHNWIs) command 12x-18x multiples, reflecting the exclusivity and stability of their client relationships.

• Asset & Fund Management Companies: Asset managers with significant AUM and strong investment performance can achieve 10x-16x multiples, depending on fund structure and investor composition.

• Fintech & Digital Wealth Platforms : Companies leveraging robo-advisers, AI-driven financial planning and digital wealth solutions often achieve 12x-20x multiples due to high scalability and investor interest in financial technology.

• Insurance & Financial Planning Firms: Companies specialising in life insurance, retirement planning and annuities typically see 7x-14x multiples, with recurring premiums and long-term contracts driving valuations.

UK wealth and asset management deals increased from 1 07 in 2023 to 122 in 2024, with the total publicly disclosed deal value rising substantially from £2.1bn in 2023 to £9.3bn in 2024.

FACTORS DRIVING HIGHER VALUATIONS AND EBITDA MULTIPLES Several factors influence valuations in the financial services and wealth management sector, with a strong emphasis on AUM, client retention and regulatory compliance: 1. RECURRING REVENUE AND FEE STRUCTURE • Firms with fee-based models (e.g. percentage of AUM) rather than commission-based income are valued higher due to predictable revenue streams.

• Discretionary investment mandates, where clients entrust full control of portfolios, enhance valuation stability.

2. ASSETS UNDER MANAGEMENT (AUM) AND CLIENT DEMOGRAPHICS

• Firms managing larger AUM with HNW and UHNW clients command premium valuations due to the stability of long-term wealth planning relationships..

3. REGULATORY COMPLIANCE AND REPUTATION

• Strong compliance frameworks and FCA accreditation in the UK, or equivalent regulatory approvals in other regions, enhance investor confidence and reduce acquisition risk. 4. GEOGRAPHIC REACH AND INTERNATIONAL CLIENT BASE • Wealth managers and financial service providers with an international presence or global client base see higher multiples due to diversification and expansion opportunities. 5. DIGITAL TRANSFORMATION AND FINTECH INTEGRATION • Firms leveraging AI-driven analytics, automated portfolio management and digital onboarding attract premium valuations due to cost efficiency and scalability. • Robo-advisory platforms and blockchain-based wealth solutions are particularly attractive to private equity and institutional investors. 6. CLIENT LOYALTY AND INTER-GENERATIONAL WEALTH TRANSFER • Firms with high client retention rates and structured succession planning for generational wealth transfers are valued higher due to long-term revenue security. 7. PRIVATE EQUITY AND CONSOLIDATION TRENDS • The sector is experiencing rapid consolidation, with private equity firms and larger financial institutions acquiring independent advisers and niche wealth managers to expand market share.

• Roll-up strategies (merging multiple IFAs into larger advisory firms) are common, driving up valuations.

WHICH FACTORS DRIVE GROWTH IN THE UK WEALTH MANAGEMENT INDUSTRY? + TECHNOLOGY • Three quarters of asset and wealth management firms believe AI will be the most transformational technology over the next two to three years, with predictions of a 12% increase in revenue. • GenAI, distributed ledger technology (DLT), ‘big data’ and cloud computing are some of the innovative tools expanding operational capabilities and transforming revenue models and business frameworks. According to a recent survey, approximately 80% of respondents stated that disruptive technologies have impacted operational efficiency and revenue growth to a large or very large extent.

Technologies driving transformation

Asset and wealth managers

Institutional investors

73%

Artificial Intelligence

65%

71%

Generative AI

63%

71%

Cloud infrastructure and technology

61%

47%

Big data analytics

58%

38%

Blockchain/Distributed ledger technology

53%

Question (all respondents): Which disruptive technologies for operations and analytics do you believe will most significantly shape the future of asset management in the next two to three years? (Choose as many as apply) Source: PwC Global AWM & ESG Research Centre

New technologies are affecting operational efficiency revenue growth and employee productivity

(Showing only ‘to a large extent’ and ‘to a very large extent’ responses)

Operational efficiency Revenue growth Employee productivity Product and service innovation Cybersecurity measures Expansion of advisors’ capacity to serve a greater number of investors Customer satisfaction/Net promoter score

84%

80%

72%

70%

54%

39%

37%

Question (all respondents): How significantly have disruptive technologies impacted these strategic areas in your AWM organisation? Source: PwC Global AWM & ESG Research Centre

• Moreover, disruptive technologies will improve wealth management firms’ offering, especially in regard to delivering personalised HNW–style financial solutions.

• Managers believe customers’ preferences will move towards personalised solutions as technology evolves. This can be attributed to the wealth transfer, estimated at $68tn over the next decade, to the younger generation.

• However, trust in technology, i.e. that data is protected and used responsibly, plays a pivotal role in the introduction of new technologies. Moreover, 67% of asset and wealth managers voice concerns regarding the accuracy of decisions made by technology. + CONSOLIDATIONS • 81% of firms are contemplating strategic partnerships, consolidations or M&A to advance technological capabilities and build an ‘extended tech ecosystem’. • 73% of asset managers considering M&A see it as a way to gain access to skilled expertise over the next two to three years. + TOKENISATION • Tokenised investment funds are expected to surge at a CAGR of 51% by 2028. Tokenised fractional ownership allows retail investors to buy small stakes in private markets and funds. Moreover, reducing the amount of investment needed may mean otherwise illiquid assets being traded on secondary markets. Approximately 50% of managers and institutional investors favour PE as the top tokenised asset class. + ESG • New gen investors, e.g. millennial and Gen Z investors who are expected to inherit $68tn in the next 10 years, are interested in ethical investment. This creates opportunities for asset and wealth management to seek ESG-aligned investments.

STRATEGIC INTERESTS OF PRIVATE EQUITY AND INVESTMENT BUYERS IN THE FINANCIAL SERVICES AND WEALTH MANAGEMENT SECTOR PE is a driving force in M&A in this sector, with 88% of UK deals in the first two months of 2025 having been either through direct investment in firms or via their portfolio companies.

Consolidation of the wealth management sector accounted for most of this activity. However, pensions consultancy and the administration market also acquired investments.

Types of Buyers as a % of Total, Announced UK Transactions

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Percentage

15% 7%

11%

12% 11%

13%

16%

26%

11%

29%

15%

24%

18%

28%

15%

88%

26%

54%

62%

45%

44%

31%

2020

2021

2022

2023

2024

YTD 2025

Announced Year

Private Equity

Quoted & Other

Overseas

Privately Held

SOURCE: MarshBerry Proprietary Database and Companies House. Data as of 02/28/25

PE is a dominant player in the wealth management sector due to recurring, fee-based revenue streams where a firm’s fees are based on an AUM structure. This steady cashflow is attractive for acquirers.

Moreover, digital and technological capabilities draw in PE investment. Advanced technologies mean customers will be more inclined to choose a wealth management firm, driving top-line growth and retention.

PE firms are interested in investing into companies that have strong compliance frameworks. Stringent regulations are being introduced worldwide and relevant authorities are focusing on client protection, e.g. the FCA regulates UK wealth management and private banking firms. It is costly to meet these standards, hence companies with already established frameworks or dedicated departments are much more attractive. As a result of the introduction of The Consumer Duty in July 2023, owners of many smaller firms were pressured to sell due to increased compliance costs. Finally, the wealth management sector is quite fragmented. Historically, PE involvement in the UK was based on consolidation and scaling opportunity in a fragmented market. IFAs and wealth models were merged by PE to benefit from economies of scale, meeting compliance and technological costs in a buy-and-build model.

KEY ACQUIRERS AND INVESTORS Major players in this sector include:

WHAT TYPES OF BUSINESSES ARE STRATEGIC ACQUIRERS PURSUING IN THE FINANCIAL SERVICES AND WEALTH MANAGEMENT SECTOR?

• Boutique and regional wealth managers

• Specialised RIAs (US ) /IFAs (UK) / Independent boutiques

• Technology-driven/WealthTech firms - E.g. JPMorganChase acquired digital wealth manager Nutmeg for £700m

• ESG-focused or Impact Investing specialists

PE is a driving force in M&A in this sector, with 88% of UK deals in the first two months of 2025 having been either through direct investment in firms or via their portfolio companies.

M&A ACTIVITY IN THE CYBER SECURITY AND I.T. INFRASTRUCTURE SECTOR

DAVIDSON DEEM ACQUIRED BY LUMIN

KBS DEAL

A Dorset-based company which provides mortgage brokerage services across the UK, Davidson Deem was sold to Lumin Wealth, a part of Swiss financial provider VZ Group and which manages client assets valued at over £1billion.

Chorley-based Perspective, a leading national firm of financial planners and wealth managers which has completed over 100 acquisitions since being formed in 2008, acquired Manchester company PW Financial Management. PW FINANCIAL MANAGEMENT ACQUIRED BY PERSPECTIVE FINANCIAL GROUP

AVA INSURE ACQUIRED BY A-PLAN HOLDINGS

KBS DEAL

London-based AVA Insure, which provides a comprehensive range of home, commercial, property and fleet insurance services, was sold to A-Plan Holdings, which integrated the company into the Aston Lark Group to enhance its growing insurance portfolio.

INEVEXCO ACQUIRED BY ASSUREDPARTNERS

KBS DEAL

InEvexco, a market-leading, Kent-based insurance specialist for the events industry, was sold to AssuredPartners, the 11th largest insurance broker in the US with revenues of over $1billion, which is now investing in UK and Irish firms as part of its international growth strategy. PWM, based in London and the Midlands and which looks after around £5bn of private client assets, acquired Aberdeen-based Johnston Carmichael Wealth to further cement its position as a leading independent UK wealth management firm. JOHNSTON CARMICHAEL WEALTH ACQUIRED BY PARTNERS WEALTH MANAGEMENT (PWM) American national wealth advisory firm Mariner simultaneously announced the transactions of Florida-based AndCo Consulting and Kentucky-based Fourth Street Performance Partners, bolstering its institutional presence by adding 100 associates and bringing an additional $104bn in assets under management. ANDCO CONSULTING AND FOURTH STREET ACQUIRED BY MARINER

Mariner added a further £292bn in assets under management with the acquisition of Chicago-based Cardinal, bringing its overall total to approximately $550 billion as of Q1 2025 and integrating 40 more employees into its operations. CARDINAL INVESTMENT ADVISORS ACQUIRED BY MARINER

Brooks Macdonald, one of the UK’s leading wealth management firms, completed the acquisition of Altrincham-based LIFT to add around £1.6bn assets under management and around 1,350 clients. LIFT-FINANCIAL GROUP ACQUIRED BY BROOKS MACDONALD

PRIVATE EQUITY ACTIVITY

REVELL WARD ACQUIRED BY DJH MITTEN CLARKE

KBS DEAL

Huddersfield-based accountancy firm Revell Ward, which provides bespoke financial and business support services to companies and private clients, was sold to private equity-backed DJH Mitten Clarke in a deal overseen by KBS Corporate.

A private equity consortium completed a £5.4bn takeover of Hargreaves Lansdown, the UK’s market-leading platform for retail investors, to accelerate and enhance its transformation plan and deliver on its growth potential. HARGREAVES LANSDOWN ACQUIRED BY A POWERHOUSE CONSORTIUM OF PRIVATE EQUITY GROUPS — CVC CAPITAL PARTNERS, NORDIC CAPITAL AND ABU DHABI INVESTMENT AUTHORITY

LLOYDS BANK’S £390M ACQUISITION OF EMBARK GROUP

Lloyds acquired investment and retirement platform business Embark Group in a deal worth £390m which was designed to improve its ability to address the mass market and self-directed wealth sector.

ADMIRAL WEALTH MANAGEMENT ACQUIRED BY KINGSWOOD

KBS DEAL

Grimsby-based Admiral, which offers comprehensive investment and pension advice and has been established for over 30 years, was sold to Kingswood, a fully integrated wealth and investment management group that operates internationally, with backing from Pollen Street Capital.

RDS ACQUIRED BY BGF

KBS DEAL

Altrincham-based RDS, which assists SME businesses and accountants in accessing R&D tax credits, received a £5m investment from the UK and Ireland’s most active growth capital investor, BGF.

Flexpoint Ford, a private equity investment firm specialising in the financial services and healthcare industries, acquired AFH, a leading UK financial planning-led wealth management firm. FLEXPOINT FORD’S £231M ACQUISITION OF AFH WEALTH MANAGEMENT

JUPITER’S £370M ACQUISITION OF MERIAN GLOBAL INVESTORS

Jupiter Fund Management paid £370m to buy Merian Global Investors in a deal that created the second largest retail asset management group in the UK, with £65bn under management.

CLIFTON ASSET MANAGEMENT ACQUIRED BY CBPE CAPITAL

CBPE invested in Clifton, a leading wealth management and pensions administration firm located near Bristol with a near 30-year history in pensions administration and wealth management, serving more than 9,000 clients.

Private equity and large firms have continued to acquire. For example, BlackRock conducted a $12.5bn cash and share deal with Global Infrastructure Partners.

MARKET INSIGHT

• Assets under management (AUM) in the wealth management market are projected to reach $168.2tn in 2025 worldwide. Financial advisory firms dominate the market with a projected market volume of $165.1tn.

• AUM are expected to show an annual growth rate (CAGR 2025-2029) of 1.94%, resulting in a market volume of $181.6tn by 2029.

• This sector can be split into Financial Advisory and Digital Investment. Advisory includes traditional services, whereas digital investment covers automated investment services and online trading services.

• Technology has been a catalyst for change in this market, with GenAI, ‘big data’ and blockchain propelling shifts in the methods by which services are offered and in the service offerings - e.g. robo-investors - themselves. Direct-to-consumer platforms for tech-savvy individuals have gained popularity. For example, Hargreaves Lansdown has expanded its offering to personal advice and digital wealth management. Nutmeg, which offers automated algorithm-based portfolios, has gained market share with over £3.5bn AUM and was acquired by JPMorganChase in 2021. More established banks are following this market trend by launching their own apps/digital advice services to retain their customer base and not be left behind, e.g. Schroders Personal Wealth (Lloyds). • Regulation highlights these shifts in the market, creating more stringent rules focusing on customer safety - in the EU, the Retail Investment Strategy was introduced to enhance investor protection; in the US, Securities and Exchange Commission’s updated cyber security disclosure rules; and the UK implemented The Consumer Duty. • Consolidations are reshaping the current landscape of the wealth management industry. Private equity and large firms have continued to acquire. For example, BlackRock conducted a $12.5bn cash and share deal with Global Infrastructure Partners. Wendel Group made a strategic entrance in 2024 with its acquisition of IK Partners, further aligning with the broader trend of major firms diversifying their portfolios and bolstering their capabilities. Many international players are looking to gain foothold in the UK market. This can be seen with RBC (Royal Bank of Canada) acquiring Brewin Dolphin for £1.6bn.

Assets under management (AUM) in the wealth management market are projected to reach $168.2tn in 2025 worldwide. Financial advisory firms dominate the market with a projected market volume of $165.1tn