Two mid-market pension consultancies today joined forces in a £153m deal they hope will smash open bigger firms' sector dominance.
Xafinity is to merge with Punter Southall, creating what boss Paul Cuff called "clear alternative to the big three in the pensions consultancy sector".
The deal, which sees Xafinity pay up to £153m for Punter Southall's actuarial consulting, pensions administration and investment consulting businesses, will create the largest “pure-play” pensions consultancy in the UK. The enlarged group will have approximately 900 employees in 15 offices spread across the UK.
Xafinity listed in London in February with grand designs on challenging the dominance of actuarial giants Willis Tower Watson, Aon Hewitt and Mercer.
“The announcement today regarding the transaction with Punter Southall is very exciting news for everyone at Xafinity, and it follows a successful period for the Company built on the back of a series of impressive client wins," said Cuff.
Punter Southall chief exec Jonathan Punter said: “This is an exciting development for the clients and employees of our actuarial, administration and pension businesses. They will benefit from increased scale and expertise."
The proposed merger will be subject to regulatory and shareholder approval and will aim to complete in 2018.
Meanwhile, Xafinity co-chief exec Ben Bramhall threw his weight behind heightened scrutiny from the Competition and Markets Authority into the investment consultancy sector.
"We fully support the regulators decision to explore ways in which the industry can work more effectively. We believe this investigation will be hugely beneficial to pension schemes and trustees."
The merger came as Xafinity announced its half-year results. Revenue grew by two per cent to £26.6m with earnings also rising two per cent to £8.7m.
Markets responded well to both sets of news with Xafinity shares rising more than seven per cent to 185.75p.
Behind the deal – with Zeus Capital's Martin Green
XAFINITY EXPERIENCE Martin worked on Xafinity’s £220m initial public offering in February. He also worked on the Tatton Asset Management float in July.
ZEUS CAPITAL was the sole broker on the deal. There was no specific start date as plans flowed from Xafinity’s IPO, where it made clear to markets it was on the look-out for acquisitions.
PISTE FAN When not hard at work, Green is an avid skier. He is also a keen mountain biker, but he is not just an adrenalin junker. “I do enjoy the theatre as well,” he says.
LIBERUM CAPITAL acted as joint bookrunner alongside Zeus Capital. Big Four accountancy firm Deloitte was sponsor and financial adviser.