M&A prices buoyant for financial services

Transaction prices for M&A in the financial services sector remain buoyant, according to HLB Mann Judd.

Speaking to Money Management, partner, Simon James, said there was a lot of excess cash floating around which was looking to be put to work.

“A lot of transaction prices are still quite buoyant, people are looking to exit and people are still looking to buy because they have lazy balance sheets, there’s a lot of cash sitting there which is not earning any interest,” he said.

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“You either pay it out as a dividend, pay debt down or borrow money and do something strategically advantageous and take advantage of the opportunities out there.”

Asked whether it was hard for buyers to find firms to purchase, he said finding opportunities was not the problem but rather firms did not always want to sell up.

“In some cases, they’ll pick something they like and spend a lot of time researching it to see if there’s an opportunity, to understand the market dynamics and the business drivers and then they don’t want to sell. It’s very time-consuming.”

Research by Radar Results earlier this year found the selling price for financial planning businesses had increased for the first time in 13 years in 2022. Financial planning businesses moved up the higher end multiple for investment and superannuation clients to 2.3 times the recurring revenue in the 65-to-79 years category which reflected demand for older clients.

According to the latest HLB Mann Judd M&A Report for the first quarter of 2022, financial services saw the highest average transaction size of all sectors at almost $500 million but the number of deals declined to less than 20.

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