The coming together this week of two UK-based wealth managers, now owned by private equity houses, sheds light on a trend under way in the UK market, drawing in players from countries such as the US. We talk to an investment bank for its perspective on what's going on.

When wealth managers Kingswood Group and Mattioli Woods said that they were merging, it was an example of a continuing trend: the consolidation of the consolidators.

Both firms - now in private equity hands - have bought other wealth managers and financial sector organisations – part of a consolidation trend that has been underway for more than a decade, particularly since the Retail Distribution Review reform programme of 2013. In July 2023, the Consumer Duty package of reforms kicked in, adding more regulatory demands and putting pressure on firms to consolidate and achieve economies of scale.

The UK wealth and financial services sector is still relatively fragmented even with all this M&A activity. And now the consolidators are going through the same process. One feature is the involvement of private equity players entering the fray. Pollen Street Capital, owner of Kingswood and Mattioli Woods, is a UK-based firm (not to be confused with a US-based firm with a similar name.) Other examples of PE firms from the US engaged in wealth management in the UK have included Charlesbank Capital Partners, which in May 2024 bought Perspective Financial Group, a UK-based independent financial advisor. Back in June 2020, US-based private equity house Warburg Pincus jumped into the merger of UK-based wealth management firms Tilney and Smith & Williamson (the organisation is now called Evelyn Partners).

“That’s testament to a strong appetite from US private equity firms for the UK wealth management space. They’ve honed their expertise in their home markets and are now applying that knowledge [to] their experience across Europe,” Antoine Dupont-Madinier, managing director at Lincoln International, told this news service. He leads the investment bank’s financial institutions group in the UK. Lincoln, formed close to 30 years ago, is headquartered in Chicago. 

“We have seen an increasing number of US private equity firms looking at the UK market,” Dupont-Madinier said.

As far as the consolidation of consolidators is concerned, Dupont-Madinier said there are more than 40 private equity-backed consolidators and platforms that have bought Independent Financial Advisors and related other organisations. “We’ re seeing signs this trend is accelerating,” he said, referring to Titan Wealth buying IWP in December, 2024; or the recently-announced merger of Mattioli Woods and Kingswood to create a £25 billion wealth manager. Another trend is PE funds re-entering the market after disposing of an asset: CBPE did this with Clifton Asset Management after selling Perspective, as did Oaktree with Atomos and CBAM after exiting Ascot Lloyd.

While large-scaled consolidation offers growth opportunities, Dupont-Madinier acknowledged that there are difficulties involved: “Bigger mergers can encounter significant hurdles, whether from technological complexities, cultural integration issues, or regulatory demands.” 

“The desire for advisors who are near retirement to sell, for example, has been a driver of sales. Other key drivers include rising technology costs and regulatory burdens. These forces have fuelled much of the growth in consolidation we’ve seen in the past decade,” he said. 

Valuations
For Lincoln, the sweet spot is the private capital markets, partnering with private equity, private credit, founder-owned and privately held businesses to realise their strategic growth objectives. 

Valuation multiples can be in the high teens times earnings before interest, taxation, depreciation and amortisation (EBITDA). The specifics will depend on the expected pipeline of acquisitions, rather than just what has happened, such as over the past 12 months.

This news service asked Dupont-Madinier about the broader economic environment and issues such as US tariffs affecting M&A. 

“In wealth management, tariffs have affected assets under management due to market-driven declines in performance, which can pressure earnings. Persistent macroeconomic weakness may also heighten redemption risks and disrupt inflows," he said. 

“However, the medium- and long-term outlook remains intact, underpinned by structural growth drivers such as rising personal wealth and increased demand for financial advice,” he concluded.