Private equity (PE) players’ rising interest in Australian financial services is driving an uptick in job vacancies, leaving sellers to question their future involvement post-M&A.
According to recruitment agency Robert Walters’ jobs index, March hiring activity in the Australian financial services sector experienced a sharp increase in vacancies at 34 per cent.
Inorganic M&A activity in the wealth management side of the market is a key contributor to this, with acquirers often looking to bring on new staff following a transaction, particularly at the C-suite level.
“Across financial services in general, I think whenever there’s a macroeconomic market where there’s a lot of challenges, that creates opportunities for certain businesses to come in over the top and acquire,” Alison Newsome, associate director of financial services at Robert Walters, said in conversation with Money Management.
“[In wealth management] it’s a great time for recruitment. So anytime there’s changes in the market, M&A being one of them and businesses growing through acquisition, it’s certainly an exciting time for us. Any change in an organisation leads to change in their staff members.”
While some buyers decide to retain existing staff from the acquired business, others look for a clean slate with the addition of new hires, Newsome explained. This is particularly the case for PE firms, which typically seek to drive further growth in the acquired practice.
“[When firms merge together] there can be the duplicate of roles. Businesses often look for a clean slate, I suppose, and that’s when redundancies come off the back of acquisition. But there are some scenarios where they keep all their staff members, and that’s obviously great,” the associate director continued.
“I would still say though, with C-suite – for example like a CFO – is often changed when there’s an acquisition, especially when there’s a private equity firm involved. If a private equity firm is involved, they’re obviously looking to grow a business after they buy them. That’s not always, but a lot of the time it means that they bring in their own CFO to align with the message that they’re trying to push.”
In her own experience working across financial services recruitment, Newsome observed the involvement of a PE player in an M&A transaction generally leads to greater hiring in at least one area of a business.
She added: “All the PE firms that I’ve been involved in across my whole division have meant increased hiring for us. Not in all divisions within a business, but certainly with one or the other.”
Some recent examples of PE companies taking a stake in the financial services space includes Sydney-based private equity firm Adamantem Capital acquiring Mason Stevens, Bain Capital and CC Capital’s ongoing bidding war for Insignia Financial, and Oaktree Capital investing $240 million in AZ NGA.
Should I stay or should I go?
From the seller’s perspective, understanding whether there will be a seat for them at the table following an acquisition or merger is a key consideration.
Speaking on a recent webinar, Business Health principal Tony Stephens unpacked: “When we’re talking about a merger or a transaction, if the person is selling, the question that one must ask is: Will there be a seat at the table? Will they have any say in the operational and strategic direction? Are there going to be future roles for that particular person?”
With the buyer often holding the bargaining power, Stephens encouraged sellers to negotiate their involvement with the firm if they seek to continue working following the completed transaction.
“If you’re selling and you want to keep working, all of those things need to be negotiated in the contract moving forward. Are you going to have a seat at the table and what ongoing input will you have? The buyer is the one that’s got the power depending on what that transaction is,” he said.
Both the buyer and the seller must have clarity around the purpose of the transaction – whether it is to achieve greater scale, leverage infrastructure, access market niches, or acquire new capabilities, Stephens also identified.
“The less alignment in the client base between the buyer and the seller means that there’s more implications.”
