M&A activity in the UK advice firm space is surging, largely driven by private equity, which continues to inject capital into firms, a market review report by Heligan Group has revealed.
The group’s partner Greg Easter said private equity is fuelling the growth of national-scale advisory networks, with secondary buyouts and recapitalisations further shaping the market.
Private equity-backed consolidation in the IFA sector has continued to accelerate, with the number of PE-backed firms increasing yearly.
Easter said persistent economic challenges shaped deal dynamics in 2024.
“Although inflationary pressures eased, elevated interest rates continued to impact financing conditions, increasing the cost of leverage and leading to greater scrutiny on transaction structures,” he added.
“As a result, asset managers faced revenue headwinds as fluctuating equity markets affected assets under management (AUM), impacting performance fees and overall profitability.”
Regulatory developments also played a key role, with the Financial Conduct Authority’s Consumer Duty initiative driving increased compliance costs and operational adjustments.
This is forcing firms to refine business models to align with evolving regulatory expectations, adding further complexity to M&A valuations
“Despite these economic and regulatory challenges, M&A activity remained robust in 2024,” said Easter.
“Private equity-backed consolidators continued to be key market players, focusing on firms with strong recurring revenue models, scalable operations and solid earnings quality.
“The emphasis on efficiency and cost synergies became increasingly important as market participants sought to optimise post-transaction performance and protect against inevitable reduction in future valuation.”
He said the IFA and wealth management sector continues to exhibit a “clear relationship” between revenue growth, earnings quality and enterprise value.
“Firms with high recurring revenue, superior margins and scalable operations attract higher valuation multiples, while those with weaker financials face more significant investor scrutiny.”
Looking ahead, he expects M&A momentum to persist into 2025, but with greater selectivity in pricing and deal structuring.
Several key transactions have already been completed in 2025, including Azet Wealth Management’s acquisition of Laurus Associates and Titan Wealth’s acquisition of Avisa Wealth.
This, said Easter, demonstrates the market’s “continued appetite” for consolidation.
“The focus for IFAs now will be on how to navigate this landscape – whether that means positioning for sale, strengthening internal capabilities, or exploring strategic partnerships,” he added.
With PE investment continuing to flow into the sector, he believes consolidation is unlikely to slow down.
Larger firms will remain aggressive in their expansion strategies, leveraging private capital to acquire and integrate smaller IFAs.
“Therefore, it is not a question of whether acquisitions will continue, but rather the volume and pace at which they will unfold in 2025.”