Is Private Equity’s Influence in Wealth M&A Sustainable? The Market May Decide
- Chapters Capital
- Mar 13
- 3 min read
Updated: Mar 14
13th March 2025
Private equity has significantly influenced the consolidation of wealth management firms, with companies like Kingswood, Saltus, and Titan Wealth aggressively expanding through acquisitions. However, the sustainability of this private equity-backed growth model is now under scrutiny due to rising debt levels, increased regulatory scrutiny, and changing market dynamics that pose challenges for leveraged consolidators.
A recent development involves Kingswood, which is in takeover discussions with its private equity backer, Pollen Street Capital. The firm is struggling with a net debt of £48.1m and faces financial obligations that exceed its available cash for March 2025. This situation reflects a broader trend in the industry, where private equity-backed firms have rapidly scaled up through acquisition financing, but at the cost of accumulating high debt loads and growing investor expectations for returns.
This raises an important question: Is the prominent role of private equity in wealth management consolidation sustainable in the long term?
Market Forces Could Regulate PE-Backed Consolidation
While concerns about debt-fueled acquisitions are valid, some industry experts believe natural market forces will hinder an oversaturation of private equity-backed consolidators. In an interview with FTAdviser, Angela Toner, a Corporate Finance Partner at RSM UK, argues that large banks and trade acquirers could challenge the dominance of private equity in the coming years, thereby limiting unchecked consolidation.
“Private equity investments typically have a lifespan of three to five years, with the ultimate goal being an onward sale—either to trade buyers, publicly listed companies, or another private equity firm,” Toner explained. “This cycle ensures the deals market continually evolves, involving ongoing interactions between private equity firms, PLC-backed businesses, and owner-managed firms that wish to maintain their independence.”
Additionally, banks with wealth management divisions—generally with lower capital costs than private equity-backed companies—could play a more prominent role in future acquisitions. This shift may provide alternative exit routes for financial planning firms considering a sale, potentially reducing reliance on private equity buyers.
The Role of Vertical Integration and Technology
One primary driver behind consolidation is vertical integration, in which wealth management firms acquire discretionary fund managers (DFMs), model portfolio services, and technology solutions to enhance profitability.
“The constant need to keep up with technological advancements will drive the acquisition of, and investment in, fintech companies,” Toner noted. “Wealth managers prioritise tech-enabled client services, and this evolution of business models will continue to propel mergers and acquisitions in the sector.”
This trend aligns with recent acquisitions by firms such as Saltus, Shackleton, and Wren Sterling, which have integrated investment management, financial planning, and technology-driven client services. However, it raises concerns about potential conflicts of interest when firms operate advisory and asset management.
What This Means for Business Owners Considering a Sale
The current landscape presents opportunities and risks for IFAs and wealth management firms weighing their options. While private equity-backed consolidators offer capital, scale, and operational efficiencies, they also have higher debt risks and pressure to meet ROI expectations.
Sellers must consider whether an acquisition by a bank, publicly listed firm, or trade buyer might provide a more sustainable long-term structure. As interest rates stabilise and capital costs decrease, non-private equity buyers may become more competitive in the market.
Ultimately, the future of wealth management mergers and acquisitions will likely reflect a balance between the ongoing influence of private equity and the increasing competition from banks and strategic acquirers. As the industry evolves, businesses considering succession planning, growth, or exit strategies must carefully assess potential partner acquirers' financial stability and long-term vision.
At Chapters Capital, we specialise in financial planning and wealth management M&A and understand the importance of strategic acquisitions for growth. Whether you are considering a sale, merger, or expansion, contact one of our professional associates today for a confidential, no-obligation consultation.