Published Thursday 19th September 2019

There’s an increasing trend across the traditional mid-market in several financial & professional services sectors towards consolidation. Why is this happening? And how can ERA help firms to embrace the opportunities?

Tilney, for instance, occupies a shrinking middle ground in the financial services sector. Traditionally providing wealth management services for generations of affluent families the firm faces pressure on margins from the ultra-low fees drawn by an ever-expanding range of cheap Exchange Traded Funds (ETFs), regulation demanding greater transparency on management charges and the sheer scale of market behemoths St James Place and Hargreaves Landsdown.

Creating Scale with Asset Management

It’s little surprise therefore that Tilney has targeted Smith & Williamson with a view to creating scale with £45bn assets under management. There are further obvious targets for acquisitive firms in the shape of smaller listed firms like Charles Stanley and numerous smaller companies with less than £5bn under management.

Driving the strategy is Permira, the private equity house that has owned Tilney since 2014. Permira has recently been in the news again having failed to agree terms for the purchase of CogitalGroup. CogitalGroup was only launched in August 2016 with funding from Hg Capital and has hoovered up the aggressively acquisitive Baldwins, UK top-20 firm Wilkins Kennedy and Campbell Dallas in Scotland. With revenues approaching £500m bids were invited over the summer – but with those bids seemingly having fallen short of Hg Capitals valuation CogitalGroup could be retained or proceed with an IPO.

A Disruptive Force

Whichever route is chosen CogitalGroup has proved a disruptive force in the market over a very short period introducing digital platforms and artificial intelligence to a plethora of, formerly, very traditional practices.

Adrian Biles from Ince, formerly known as the AIM-listed consolidator Gordon Dadds has issued stark warning to mid-market law firms “If you are not in a business which is fit for purpose moving forward, the things you read in the press about Deloitte and the Americans should be making you very nervous.”
Like CogitalGroup Ince has grown through acquisition from modest beginnings to £100m revenue in a very short space of time.

Downward pressure on fees, technological change, new entrants to the market and the advantages of scale – particularly in back office costs are all key drivers in professional services consolidation.

Opportunities to Save Money

Firms need to interrogate how and why they spend money on supplies and services, as well as how much they pay. The opportunities to save money and improve processes are legion – but beyond their core business processes firms are often unable to spot or harness the benefits in a timely manner.
This is where ERA’s network of experts in Financial & Professional Services can add huge value to your firm.

About the Author: Jason Adderley, leads Account Management & Development in the professional services sector for ERA. He joined ERA after a 15-year career in the commercial property development and investment industry, and works with a diverse client base comprising solicitors, actuaries, chambers, patent attorneys, accountants, surveyors, consulting engineers and recruitment consultants.

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