Industry reaction: abrdn and Interactive Investor deal 'a bold move'

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Industry reaction: abrdn and Interactive Investor deal 'a bold move'

The move by abrdn to acquire subscription-only investment platform, Interactive Investor, has been dubbed a "bold move" by the industry.

The deal will see abrdn acquire 100% of the platform, including the majority stake currently held by JC Flowers IV LLP. 

"It is an interesting move by abrdn, especially as they recently sold one of their other platforms, Parmenion, though obviously that was in the adviser space," said Ben Yearsley, director at Fairview Investing. "All fund groups want distribution for their products, this is one route - it will be interesting to see how open architecture the platform remains though."

This move clearly signals the growing importance of a non-advised customer to UK asset managers and will cause lots of discussions and strategic reviews at abrdn's competitors over the coming months."

He added: "Fidelity have done it reasonably successfully with FundsNetwork and there is not an overt push on Fidelity funds. Will abrdn be able to resist? Then again, does it matter as they are buying into one of the big growth areas - namely D2C."

Boring Money CEO Holly Mackay called it "a bold move" by abrdn, adding that it "gives them an immediate transaction engine and access to a customer base which is typically more affluent and confident than the average investor".

"The synergies between ii's customers and abrdn's customers and brands remains to be seen. This move clearly signals the growing importance of a non-advised customer to UK asset managers and will cause lots of discussions and strategic reviews at abrdn's competitors over the coming months," Mackay added.

Mike Barrett, consulting director at the lang cat, said: "There has been a flurry of M&A activity recently, and at £1.49bn this is one of the largest deals to date.

"Abrdn now has market-leading platforms in both its adviser and personal vectors, and with interactive investor having one of the largest average case sizes in the D2C market, as well as the certainty of revenue its fee model creates, it is easy to see why abrdn feels this will be a good acquisition."

But Clive Waller, managing director of CWC Research, questions the benefits of such a deal.

He said: "abrdn assures us that ii will stay independent and separate, which makes one wonder what the benefit is to them. It seems many firms are desperate to acquire more and more of the value chain, with little obvious benefit in some cases."

Abrdn first announced the potential deal with ii in November and the market responded well to the news, with the asset manager's share price spiking following reports that talks had begun. 

Richard Wilson, CEO of ii, will move to abrdn to continue to lead the growth and development of the platform, which is to retain its branding as a standalone business under the terms of the deal. 

Susannah Streeter, senior investment and markets analyst at HL, warned though that integrating a company of ii's size "doesn't come without its pitfalls".

‘'In the long run we think retail investors probably provide a relatively stable source of assets for the group. It's this that's behind the takeover of interactive investor, which is one of the UK's biggest direct-to-consumer investment platforms," Streeter said.

"We do think the deal has merit as it fits with abrdn's strategy to build scale and improve its own direct-to-consumer offering. Taking on an established platform is, in theory, a sensible and faster way to do this. However, there will be a reasonable amount of execution risk.''

For the transaction to complete, abrdn shareholders must give their approval at the next general meeting that is expected to take place in the first quarter of 2022. The deal is then likely to complete in the second quarter of 2022.

Waller said that abrdn has "had a difficult ride" since the merger of Aberdeen Standard and Standard Life.

He added: "If I were a shareholder, I might ask whether it would be better to investment in the core propositions of platform and asset management than go on a buying spree. 

"The D2C market will be increasingly dominated by digital players with a real customer understanding and low cost."

Prior to the deal, ii had reportedly been prepping for an IPO to take place in early 2022 that would have seen it listed alongside platform rivals, Hargreaves Lansdown and AJ Bell. Today's deal puts an end to those plans. 

Abrdn CEO Stephen Bird has been prioritising the FTSE 100 asset manager's expansion into digital investment services, capitalising on the pick up in retail investors "doing it themselves" since the onset of the coronavirus pandemic forced people to stay at home. 

The company recently acquired retail content platform, Finimize, which has one million subscribers to its daily newsletter and 40,000 paid content subscribers.