The second instalment in Davies’ M&A risk series explores the nuanced challenges of mergers and acquisitions in the UK wealth management sector. It highlights how deal value degradation (DVD) often stems from a misalignment between the acquiring firm’s operating model and the target firm’s client segments. This misalignment can cause costly integration issues and missed revenue opportunities.
A key theme is understanding the distinct needs of different client demographics. Particularly the contrast between younger, long-term investors and older, near-retirement clients. The paper stresses that CEOs must assess whether their operating model can serve the target’s client base post-acquisition. This includes evaluating if the acquisition will enhance capabilities, open new market segments, or add complexity.
To mitigate risk, Davies recommends a structured approach. This includes a “visioning and target state analysis” to identify gaps in client servicing and operational capabilities. The process helps firms anticipate integration costs and avoid strategic missteps.
The paper also underscores the growing influence of Millennials and Gen Z in wealth management. It cites a 60% rise in defined contribution pension savers between 2015 and 2020. These younger cohorts demand digital-first, flexible services—further complicating integration for firms with legacy systems.
Mergers and acquisitions in this space require more than financial due diligence. They demand operational alignment, client insight, and a clear strategic vision.
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