This content is from: Portfolio

U.K. Consultant Snaps Up Rival Amid Competition Probe

Two mid-market pensions consultancies are merging in anticipation of new business following the Competition and Markets Authority’s impending crackdown on the industry.

  • By Joe McGrath

U.K. pension consultant Xafinity is set to buy the pensions and investment consulting business of Punter Southall in a £153 million ($205 million) deal.

If approved, it will be the first acquisition by a consulting firm since the U.K.’s Financial Conduct Authority referred the industry to the country’s competition regulator, the Competition and Markets Authority, after a damning assessment.

The CMA is expected to introduce rules to disperse clients currently served by the big three players in the market – Aon Hewitt, Mercer, and Willis Towers Watson. Consolidation in the market is anticipated as smaller firms strengthen ahead of the ruling.

The FCA’s report on the asset management industry found that these three players currently hold between 50 percent and 80 percent of the total market share. In the U.K., investment consultants are highly influential in the allocation of investments by asset owners, particularly pension funds.

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Speaking to Institutional Investor, Paul Cuff, co-chief executive officer of Xafinity, said he expects the CMA review to result in more business for his firm, and an acquisition made sense to strengthen Xafinity’s capacity and resources. The newly combined company will focus purely on pensions consulting, with no fiduciary, or outsourced-CIO, business.

“We look at the CMA review as a great opportunity,” he said. “If you look at where we are, we don’t do fiduciary and Punter Southall doesn’t do fiduciary. Punter Southall used to have a business that did fiduciary, which they sold.”

Cuff added that no redundancies will result from the merger, although the London offices of both firms will likely merge as a result, due to the lease on one of the buildings coming to an end within the coming 12 months.

“We have a strong transition plan,” he said. “We expect the business to rebrand and it definitely won’t be Punter Southall or Xafinity, but we will decide all of that in time.”

Cuff will continue as co-CEO of the merged business with Xafinity’s other co-CEO, Ben Bramhall. Punter Southall chief executive Jonathan Punter will serve as a non-executive director, while John Batting, the CEO of the Punter Southall’s actuarial consulting business, will join the board as an executive director.

Cuff and Punter have a long history in the market together, as Punter gave Cuff his first job in the consulting industry, when he left university.

Deloitte served as Xafinity’s main adviser and sponsor of the deal. Zeus Capital and Liberum Capital underwrote the acquisition. Punter Southall was advised by Craven Street Capital.

In a written statement, Punter said the clients and employees of his firm’s actuarial, administration, and pension businesses would benefit from “increased scale and expertise.” The proposed merger is subject to regulatory and shareholder approval and is expected to complete during 2018, according to Punter Southall.

The Punter Southall Group will continue to separately own and operate businesses in wealth management, workplace saving, and health and protection. Xafinity’s independent trustee business, HR Trustees, will merge with Punter Southall Independent Trustees as part of the deal.

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