Could Bravura be a target as PE firms seek tech assets?
Wealth management technology provider Bravura has been flagged as a potential private equity target, with commentators identifying how chair Andrew Russell has enacted a successful turnaround.
At the end of 2024, the firm was identified by Finura as being a potential target for private equity (PE) firms in 2025 for its turnaround activity.
The firm underwent a turbulent period with multiple people moves in quick succession but appointed chief executive Andrew Russell from Class in July 2023. He was the third CEO the firm had in three years, following the departures of Andrew Parsons and Libby Roy who each held the role for less than two years.
Bravura had faced challenges around its revenue, weak cash flow and a falling share price, hindered by the departure of longstanding chief executive Tony Klim after 13 years in 2021. It also faced competition from rivals such as FNZ, GBST and SS&C Technologies.
Upon taking over the role, Russell embarked on an aggressive cost-cutting process which aimed to reset and energise the business, as well as accelerate financial performance via rebuilding client trust and shareholder reputation, building a product-focused capability, and delivering a lower cost to serve. Initial projections of $25–30 million more than doubled, with cost-cutting ending up at $67 million and counting.
Commenting on the potential for the firm to be a target for PE, Peter Worn, joint managing director at Finura, said undervalued technology assets are of interest to PE players.
“Bravura has done a wonderful job at turning around the business over the past 18 months from what was heading towards a disaster. That said, even with a significant recovery in the share price, it sits well below its peak in 2019.
“Their cash flow are now more stable and returning excess capital to shareholders suggests a leveraged buyout could be easier to pull off. PE firms are on the lookout for undervalued technology assets with strong economic tailwinds and long-term sticky contracts, wealth management offers that.”
He highlighted Bravura’s largest shareholder Pinetree has a 22 per cent stake and could look to offload this stake in light of the positive share price growth.
Shares in Bravura have risen by 175 per cent over the past year, with the share price having started to rebound in March 2023 after losing 94 per cent between its peak in May 2019 at $4.92 and a low of $0.29 in March 2023 when it experienced high volatility.
Alex Shevelev, portfolio manager at Forager, holds a 6.3 per cent position to Bravura in its Australian Shares Fund, and said Bravura has made an “incredible effort” to restructure the business.
“There has been an incredible effort to cut costs. It’s the most aggressive cost-cutting effort that I’ve ever seen. They are generating free cash flow now and are moving to a more normal margin.
“The share price has moved dramatically over the last six to 12 months. This reflects an appreciation that the firm isn’t broken and the management has turned it around.”
However, Shevelev disputed the idea of PE interest as he felt the turnaround typically sought by PE firms has already been enacted.
“It would have made more sense to do M&A activity earlier. If someone is interested now, then they will have to pay up for a meaningful premium. The potential for M&A is not a core part of our investment thesis.”
The next step for the software firm, he said, is to focus on revenue growth.
“The revenue they do have currently is very high quality, but they haven’t had much revenue growth yet. That’s the next step,” he said. “They are working with large institutions like Aware Super, and if they can get more of them, that will be interesting."
Looking at the firm’s rivals, SS&C acquired the managed funds administration (MFA) business of Iress in August 2023, followed by signing a deal with Insignia Financial to transform its Master Trust business in December 2024.
FNZ has been expanding into the adviser market and working with firms such as CFS and Centrepoint Alliance to help them launch their own platforms, while GBST has been upgrading its digital advice practice management system and appointed an APAC head from SS&C.
AUTHOR
Laura Dew
Recommended for you
ASIC has taken action against a Queensland adviser who was sentenced last May for misappropriating $1.8 million from his clients.
WT Financial managing director, Keith Cullen, says the firm is looking inward when it comes to M&A, with a focus on helping practices in its network become “bigger, better and stronger” via scaling up.
The Senate has opted to extend the date of the inquiry into Dixon Advisory and wealth management companies, having originally been scheduled to complete next month.
A former Insignia Financial C-suite exec has taken on a leadership role at MUFG Retirement Solutions as it announces chief executive Dee McGrath will depart after six years.
