Some weeks there’s no place for whimsy.  Two hours and 40 minutes flight time away things are going on this minute that render jokes pointless, to a country full of brilliant, utterly bonkers people who couldn’t deserve it any less. So no whimsy this week, but a quick reminisce instead.

#STANDWITHUKRAINE

Back in the days when I used to run front-of-house for venues in the Edinburgh Festival Fringe, I worked with a Ukrainian theatre company who absolutely lit up the crappy space they’d rented with an incredible physical adaptation of Macbeth. (It had to be physical as they’d translated it into Ukrainian, because of course they had.)

Anyway, they scrimped and saved to afford the outward trip, which they made in an extremely rickety coach absolutely stuffed to the gills with Ukrainian vodka. They sold the vodka while over here (at least what they hadn’t poured down the throats of unsuspecting venue staff) and used the money to buy diesel. That diesel fuelled the bus for the trip back and then they sold the rest of it when they got home; the profit on both liquids paid for the trip and kept the company going. They were beautiful, resourceful, bat5hit crazy folk and we all became festival friends, which means you’re best mates for exactly three weeks in August. I have no idea where they are now, or if they’re OK, but I like to think that wild spirit that was in them – and I don’t just mean the vodka – is in all Ukrainians and will carry them through this evil.

You can – and should – donate to the Red Cross appeal here.

BACK TO BUSINESS

Other than expressing solidarity, maybe the best thing we can do is get on with the task in hand. And that task this morning is made much easier by Aviva’s very collegiate timing of its purchase of Succession Wealth – the consolidator with £9bn or so of assets under advice. We approve of all deals announced at 7am on a Wednesday. Thursdays, not so much.

Quick stat attack to save you a click – the purchase price is a zesty £385m which feels like it will be a decent premium for Inflexion, the PE backer of Succession. The anticipated EBITDA for 2022 is £24m, so that’s a 16x multiple. I don’t have 2021 figures, but the 2020 turnover was just under £75m and losses were just over £16m (£3.6m on a pure operating basis). That’s based on AUA of about £7.6bn. So if those 2022 figures come good, it’s quite a financial turnaround and a good time to pick the business up.

There’s a lot going on here, so I’ll just pick out a couple of things and we’ll do some more detailed analysis over the next day or so which we’ll release to premium Analyser subscribers first.

First, the 200 or so Succession advisers guard their independent status jealously. It would have been *way* easier to have turned Succession restricted and mandate use of internal CIPs and the platform (which is run by M&G-owned IFDL; I sense some interesting meetings coming up…) but that didn’t happen. The reflexive “Succession turns restricted” comments that are popping up already feel premature – Aviva will surely be keenly aware of the risk of major attrition and the threat to AUA that would come with it.

Talking of attrition, planners with a stake in Succession will presumably be doing well out of this – it certainly looks like Inflexion will be in the mood to order a pudding as well as a main course tonight. Once those planners have been paid out – and we don’t know the structure yet – it’ll be interesting to see what the attrition rate becomes.

Longer term, the RNS announcement is full of talk of the Aviva back book, with £96bn of workplace assets and £139bn of individual savings and investments. Succession will clearly be crucial in building an advice proposition for that book, and we can make an educated guess that Wealthify will be involved too. Aviva suffers £6bn AUA attrition each year; that’s your target right there.

Execution of that is a different matter entirely. The channel clash fight is real; Aviva will have to be very careful of existing adviser relationships. This sounds easy but really isn’t when you try and do it at scale, with sometimes quite limited data. The proposition will have to be *chef’s kiss* to make Aviva a more attractive consolidation destination than, say, Hargreaves Lansdown, Vanguard, or the other vertically integrated shops – again, easier to say than do.

More broadly, we asked ‘who benefits?’ in our #langcatlive event on 10 February. This is exactly what we were talking about. The industry, as it re-integrates and as big shops like Aviva buy up the value chain, starts to look more and more like it did in the late nineties and early 2000’s. That’s not a bad thing by itself – as long as the client remains at the heart of everything and that we don’t destroy the progress made over the last 20 years. The key is in the intent of the new/old barons, and in the execution.

And finally, we’re ready to call the top of this particular market. The valuation is punchy, Aviva is probably the last of the really big shops to pick up a consolidation vehicle, and supply is starting to become constrained. More deals will happen, but it’s hard not to think that the smart money is already out there on the field.

#LANGCATLINKS

  • We’ll keep these brief, but in a masterstroke of timing, #HomeGames at 12.30pm today is on consolidation. No, we didn’t plan it that way. Natalie is joined by Fairstone, True Wealth, Kingmakers and Informed Financial Planning for what will be a timely and fascinating session. You can register here, free as always, and it’ll be up on YouTube later too.
  • Tom’s latest podcast podcat with James Coney of The Times and Sunday Times is also relevant to the above. And it covers Ali Hussain’s relationship with the advisory profession too…unmissable. Listen back here.
  • Other news is available – Rob Cochran of Scottish Widows has done a very good long read on dashboards
  • And your music choice this week is from Ukrainian groove metal overbeings Jinjer. Their Wallflowers album from last year was good, but I prefer 2019’s Macro, so here’s On The Top from that fine record. Joy as an act of resistance.

See you next week

Mark