IF YOU want to see an unsung example of the restructuring of the Australian economy, pop up to the 41st floor of the postmodern monolith at 120 Collins Street.
Behind the glass and granite facade, the former offices of the
listed financial services buying
outfit DKN sit vacant and silent
following a takeover by consolidator IOOF last October.
It's an eerie example of the consolidation of the Australian wealth management industry that is gathering pace, with implications for staff, shareholders and customers.
Last Thursday and Friday two new bids were made for financial services companies at the smaller end of the market.
On Thursday, private-equity firm Crescent Capital made a $220 million bid for listed life insurer ClearView Wealth in the hope of shaking out major shareholder GPG, which had already signalled an orderly sell-down of its portfolio. GPG was quick to dismiss the
Crescent offer as wholly inadequate. Yesterday, ClearView's board said the bid was opportunistic and designed to take advantage of uncertain and volatile investment markets. Then on Friday, IOOF struck again. Perth-based wealth manager Plan B said
directors were supporting an $49.1 million for the company.
Plan B has had a data room open in Perth for several months to allow prospective bidders the opportunity to examine the purchase of a controlling stake in the firm.
Directors control about 38 per cent of Plan B so their recommendation to accept the IOOF offer, in the absence of a superior proposal, carries more significance than
usual. IOOF is eyeing the savings it can generate from the $22 million that Plan B spends on its 167 headcount, while retaining as much as it can of Plan B's $2.2 billion in funds under administration.
ClearView's suitor has confirmed its life insurance capability to be a strategically significant asset in the context of an over-consolidated market, while Plan B has represented one of the premier cost-out opportunities in Australia's wealth management landscape because of its past commitment to doing everything in house despite its lack of scale.
All this follows CBA's buyout of Barry Lambert's Count Financial last December.
Against a backdrop of credit growth at record low levels and anaemic fund inflows, growth through acquisition for the big firms is looking increasingly attractive. Especially when targets are trading at single-digit multiples of already depressed earnings.
With compulsory superannuation contributions legislated to increase to 12 per cent from 9 per cent over the next eight years, one can argue that the long-term prospects of the sector have never been better despite the ill-health of markets at present.
Investment bankers now say the big banks and wealth managers are willing to contemplate targets that "don't tick all the boxes" in the knowledge that soon there will be few potential targets left.
It's a land grab for distribution.
Not surprisingly, big investors are asking which companies in the listed diversified financial services space are next to be targeted.
As the old-timers say, you should never buy for takeover, but below are a few that Investorfirst Securities believes are likely players in the further consolidation of the market. Like the rest of the industry, each is battling tough market conditions, which is going to have an impact on short-term earnings potential.
WHK Group is the country's fifth-biggest accounting group and the only major one to be listed. It manages 19 firms, mostly on the eastern seaboard, with a specialist financial services division in all but one.
Shares in WHK have risen of late as investors have contemplated its open register, its administration of 11,000 DIY super funds and the importance of quality tax advice in a post-FOFA (Future of Financial Advice legislative reforms) world.
Equity Trustees is a fiduciary specialist, with a particular strength in providing trustee
services to third-party institutional funds wanting to tap the local
market. Over the years it has received several unsuccessful takeover bids by its biggest shareholder, The Trust Company.
Perpetual Ltd is another trustee company ripe for the emergence of a big-cap strategic investor willing to acquire options on one of the best brand names in wealth management. And then there is the Tasmania-based MyState Ltd, which has a banking services business and a trustee/wealth advisory business that is often overlooked by the mainlanders.
Soldfield@investorfirst.com.au
Frequently Asked Questions about this Article…
What consolidation is happening in the Australian wealth management sector right now?
The article describes a wave of consolidation: IOOF has completed takeovers (for example DKN) and is bidding for others such as Plan B, private equity Crescent Capital launched a $220 million bid for ClearView Wealth, and CBA recently bought Count Financial. The trend is driven by big firms pursuing distribution, cost synergies and scale.
How could wealth management consolidation affect everyday investors and customers?
According to the article, consolidation can affect staff, shareholders and customers — potentially creating cost savings and tighter distribution networks, while changing ownership of advice and product platforms. For customers this can mean different service arrangements as acquirers integrate businesses and try to retain funds under administration.
What happened with Crescent Capital’s $220 million bid for ClearView Wealth?
Crescent Capital made a $220 million bid aiming to prompt major shareholder GPG to sell down, but GPG dismissed the offer as wholly inadequate. ClearView’s board described the bid as opportunistic and designed to take advantage of uncertain and volatile markets.
Why is IOOF interested in buying Plan B and what are the financial drivers?
IOOF offered about $49.1 million for Plan B. The article says IOOF is attracted by potential cost savings — Plan B spends roughly $22 million on 167 staff — and by retaining as much as possible of Plan B’s ~$2.2 billion in funds under administration (FUA). Plan B directors, who control about 38% of the company, recommended accepting IOOF’s offer in the absence of a superior proposal.
Which listed financial services companies are named as likely takeover targets?
Investorfirst Securities highlighted several likely players for further consolidation: WHK Group (a listed accounting group with administration of about 11,000 DIY super funds), Equity Trustees (a fiduciary specialist with a history of takeover approaches by The Trust Company), Perpetual Ltd (a well-known trustee brand) and Tasmania‑based MyState Ltd (banking plus trustee/wealth advisory services).
Does the compulsory superannuation increase change the long‑term outlook for the sector?
Yes — the article notes compulsory superannuation contributions are legislated to rise from 9% to 12% over the next eight years, which supports a positive long‑term outlook for the sector despite current market weakness and low fund inflows.
Why are big banks and wealth managers willing to buy companies that “don’t tick all the boxes”?
Investment bankers say with credit growth weak and fund inflows anaemic, many targets are trading at single‑digit multiples of depressed earnings. Big acquirers see a land grab for distribution and are prepared to contemplate imperfect targets now because fewer potential targets will remain later.
What should everyday investors monitor as consolidation unfolds in wealth management?
The article suggests watching takeover bids and board recommendations, funds under administration (FUA) figures, cost‑saving rationales from acquirers, open share registers and major shareholders (like GPG or director holdings), and policy changes such as the superannuation guarantee increase — all can influence company value and customer outcomes.
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