A regional advice acquisition, a platform investment and the sale of a national group require different decisions. Knowing which market a business belongs in changes the way buyers and sellers should approach it.
By Dr Daniel Baade | Chief Executive Officer, Dyer Baade & Company | 7 min read
An unsolicited approach can do more than open a conversation. It can quietly define the transaction before the owner has decided what they want. A consolidator describes the business as a regional addition, discusses integration and proposes a price based on its established acquisition model. Those may all be reasonable starting points for that buyer. They need not describe the full set of choices available to the shareholders.
UK wealth management M&A is often presented as a single market, with a sector multiple, a list of active buyers and a prevailing appetite for acquisitions. Our research suggests a more useful distinction between three related markets. Smaller acquisitions are generally assessed around integration into an existing group. Mid-sized businesses can have several ownership routes. Larger transactions may change the acquirer’s strategic position and require a quite different level of capital and execution capability.
The framework in Dyer Baade’s wealth management market research uses indicative client-asset bands of up to £500m, above £500m to £2bn, and above £2bn. These are aids to understanding business scale, rather than automatic transaction categories. Client assets are reported differently across advice, discretionary management and administration businesses. A firm’s management, economics and strategic relevance can be more important than which side of a numerical boundary it occupies.
At the smaller end, the buyer usually already has the central infrastructure needed to operate the acquired business. Its assessment concentrates on what can transfer successfully: client relationships, recurring income, advisers and local reputation. The economics may depend on shared compliance, technology or premises, together with the cost and time required to integrate. A good acquisition can strengthen a regional presence without requiring the buyer to reconsider the way the wider group is run.
That does not make such transactions simple. Client trust can be personal, employees may be uncertain about the change and systems can be difficult to reconcile. It does mean that an experienced acquirer may be able to apply established criteria and repeatable processes. The distinction is important for investors assessing a consolidation strategy: a method that works well across many smaller acquisitions is a specific operating capability, rather than proof that the organisation can absorb any size or type of business.
In the middle of the market, the range of possibilities can become wider. A firm with £500m–£2bn of client assets may have a capable management team, meaningful earnings and enough infrastructure to remain independent. It may also offer the foundation for a private equity investor entering the sector, or a substantial regional business that an established group would find difficult to reproduce. The same company can therefore be relevant to counterparties with quite different objectives.
For shareholders, that can create choices over how much liquidity to take and how much of the future business to retain. A minority investment may fund growth and release some capital while leaving existing shareholders with majority ownership, subject to the governance rights agreed. A majority investment may support a more ambitious acquisition programme. A strategic sale may offer substantial immediate liquidity and a different future role for management. Independence remains a credible alternative where the business can fund its plans and meet shareholder needs.
These options are earned through the company’s capabilities. A sizeable client book does not automatically make a platform. An investor backing a new group needs confidence that management can lead a larger organisation, attract people and deploy additional capital. If the founder remains responsible for every material client, hiring and operating decision, scale may have advanced further than institutional capability. That business may still be attractive, but its immediate ownership alternatives will be narrower than the asset total suggests.
For a private equity firm seeking an entry platform, the distinction changes the search. Screening by assets and profitability is useful, but insufficient. The investor needs to decide which capabilities must exist at completion and which it is prepared to build. Buying a strong advice business and turning it into an acquisitive group can be a credible strategy. It requires a different budget, timetable and tolerance for risk from buying a business that already has the management and infrastructure to execute that plan.
At the larger end, transactions can alter the shape of the acquirer itself. A substantial acquisition may add a new client proposition, an investment capability or a management team with influence across the combined group. It can also introduce competing systems, overlapping leadership and a demanding integration programme. The number of credible buyers may narrow because financial resources alone are insufficient: the acquirer needs the conviction and organisational capacity to undertake the change.
This creates a potential misunderstanding for owners who assume that getting bigger must continually broaden the buyer universe. Growth can make a company relevant to new investors while putting it beyond the comfortable acquisition size of others. A sponsor preparing an exit from a £1bn–£5bn client-asset business should therefore assess the prospective next owners early. What one buyer regards as an attractive platform, another may regard as a demanding integration that competes with several other uses of capital.
The consequences for a sale process are substantial. A standard consolidator presentation might concentrate on transferable earnings and integration benefits. A platform investment case must explain what can be built around the management team and the capital needed to do it. A strategic buyer may need to understand how a combination improves its position relative to its own competitors. The underlying facts must remain consistent, but their relevance to each investment decision will differ.
Our approach to advising owners and investors starts with that strategic assessment. Before a buyer list is assembled, the company needs a defensible view of its capabilities and the alternatives its shareholders would actually accept. It is then possible to identify counterparties whose interests overlap with those objectives. A broad process can be valuable, but breadth should come from several credible investment cases rather than indiscriminate circulation.
For owners two years from a decision, this framework can inform what to build next. A business seeking platform backing may need to demonstrate independent leadership and reliable operating information. One more likely to join an established group may create value by strengthening retention and reducing integration uncertainty. A firm whose shareholders prefer independence may prioritise succession and the cash required to fund growth. Preparing for those outcomes involves different choices, even where the current financial figures look similar.
Buyers also benefit from being explicit about the market in which they intend to compete. A high-volume acquisition programme needs efficient execution and disciplined integration. A strategy built around fewer, more consequential transactions needs deeper assessment of management, compatibility and the combined business. Pursuing both is possible, but it requires resources and decision processes suited to each. Using the same template for every opportunity risks either missing strategic value or paying for capabilities the group cannot use.
The first approach an owner receives is evidence of one buyer’s interest. It should prompt a wider assessment of what the company could become, who can support that future and what shareholders want from it. Understanding the relevant M&A market gives both sides a better basis for price and structure. It also helps an owner recognise when the most attractive proposal is to keep building the business they already own.
About the author
Dr Daniel Baade is Chief Executive Officer and Co-Founder of Dyer Baade & Company. He advises founders, boards and private equity investors on sales, investments and acquisitions across Wealth & Asset Management. His work combines transaction execution with proprietary research into valuations, buyer behaviour and ownership. He works with clients from early consideration of their strategic options through preparation, negotiation and completion.
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