Featured in Funds Global Asia:
67 M&A deals worth £8.4bn were completed last year in the British Wealth sector, and experts expect even greater deal activity this year (Boston Consulting Group). In this piece, Yann Bloch, VP of Product Management at Data Management Firm NeoXam, discusses one of the most overlooked but crucial factors, that determine takeover success – an effective Data Management strategy.
Issues such as Data Integration, governance, Regulatory Compliance, and security, are often overshadowed by other factors determining takeover success. These issues are particularly acute in the wealth sector, where firms are typically underpinned by outdated legacy systems that struggle to integrate with modern software architectures and adapt to the evolving demands of Financial Data. This piece calls for the urgent need for firms to address these hurdles to maintain competitiveness in the increasingly Data-driven landscape of Wealth Management M&A. A confluence of tailwinds indicates 2025 could be a bumper year for Mergers and Acquisitions (M&A) – particularly in the rapidly evolving Wealth Management sector, where consolidation in the UK and farther afield is already well underway.
According to Boston Consulting Group, a total of 67 M&A deals worth £8.4bn were completed last year in the British Wealth sector, and experts expect even greater deal activity over the coming 12 months. They cite the large degree of Private Equity (PE) ownership in the sector as a key driver behind the trend, with many PE houses having held Assets for more than three years and likely to sell amid growing pressure from LPs. Greater economic and political stability in the UK and US could also encourage more transactions. The trend is also gathering steam far beyond Britain’s borders. Just days into the new year, news has already emerged of a $1.78bn takeover bid by US-based Investment Manager CC Capital Partners for Australian Wealth Management Firm Insignia.
While the factors that determine takeover success – like timing, cultural compatibility, and leadership alignment – are complex and manifold, one often overlooked element is the importance of effectively navigating the Data dilemma inherent in acquisitions. And yet, this is an increasingly crucial aspect of M&As, especially in highly Data-driven industries like Investment Management. Indeed, as consolidation in the Wealth sector continues to play out, it could be the strategic management of Data that separates successes from failures and leaders from laggards.
One of the trickiest Data challenges centers on integration. When Firms merge, they encounter the daunting, albeit essential, task of meshing vastly disparate Data systems, sources, and processes. Customer Relationship Management, Investment Portfolio oversight, and Performance Reporting are just a few of the extremely Data-dependent processes that must be housed under a new roof. From a Data Management perspective, this can be fraught with teething problems. Data silos – whereby key Data is stored and managed separately across different departments or applications – often hamstring merging Firms, as applications fail to communicate and share Data seamlessly. Breaking down these silos will be crucial for merging firms if they are to create a unified view of Financial Performance and client information – a cornerstone of any effective Wealth Management strategy.
However, achieving a smooth integration is made doubly difficult by the legacy systems that typically underpin established Wealth Management Firms, many of which are frightfully outdated and incompatible with modern software architectures. This issue is particularly acute in the Wealth sector, as many players in the space – often distinguished by their extensive histories – rely on bespoke systems implemented decades ago. These are understandably ill-equipped to accommodate the dynamic nature of modern Financial Data. For instance, many will have been designed when Asset classes like cryptocurrencies were merely conceptual – if not earlier.
If the above isn’t alarming enough, it is probably worth highlighting that Data silos, legacy systems, and the whole Data Integration headache are just a few of the digital challenges that must be negotiated when firms merge. There are also troublesome concerns surrounding Data Governance, Regulatory Compliance, and security that arise – all of which must be addressed thoughtfully and strategically.
With this in mind, firms on the hunt for Wealth Management businesses must ensure they take a good look under the bonnet of potential targets, paying close attention to their Data DNA. Those that don’t could see their merger sputter and stall, while more Data-savvy competitors leave them stranded in their rear-view mirror.
