Comment: Hargreaves Lansdown agrees £5.4bn private equity takeover

What impact will the potential acquisition have in terms of market and industry dynamics? By Christian Kent 

“The acquisition of Hargreaves Lansdown by private equity underscores the valuation disconnect for wealth managers between public and private markets. With over 25 private equity-backed wealth management firms in the UK, this move isn’t surprising. Over time, we expect to see further consolidation among these firms, and with robust private equity backing, HL could emerge as a pivotal player in this consolidation through M&A activities.”

How might the management and strategic direction of Hargreaves Lansdown change under private equity ownership, and what potential value could this bring?

“Under private equity ownership, the platform will likely experience strategic and managerial changes, addressing the structural challenges it has faced in recent years. That said, Hargreaves Lansdown possesses substantial brand value with nearly 2 million active customers and the private equity business model, with a longer-term focus and strategic expertise, could help HL drive necessary changes outside the constraints of the quarterly earnings cycle.

One area of potential development is the integration of advisory services into HL’s business model, aligning it more closely with other private equity-backed strategies in the sector. I’m confident there will also be a focus on improving technology and automation to facilitate a more competitive pricing structure for clients.”

How might the deal influence future PE activity in the wealth and asset management space? May it have a ripple effect?

“The listed market has fallen out of love with UK wealth managers and we have seen one way traffic in terms of public market exits, including AFH, Harwood, Mattioli Woods, Nucleus, Curtis Banks, IFG, Charles Stanley and Brewin Dolphin.  It wouldn’t surprise me if others follow in the future”.

Christian Kent is a Managing Director in Houlihan Lokey’s FinTech Group