This morning, IntegraFin Holdings, the company that owns Transact, officially announced its intention to float. Could this be the tipping point toward investment platform consolidation?
The IPO will set a price for the value of Transact shares. This will help to establish a value for other platforms as well. There are always a few deals being discussed in the platform space – now is no different. Many of these deals go south because parties can’t come to agreement on a fair price. Setting a price for Transact shares will help others to define the price of other platforms too.
I spoke with someone this morning who pointed out that investment banks will be crawling all over the investment platform market as a result of Transact’s announcement. Investment banks like to do deals. Their interest in our sector may well lead to more deals.
The IPO could be good news for advisers that use Transact as well as for shareholders. Hargreaves Lansdown’s IPO was a catalyst for growth for that business. It helped to raise the profile of the business. While brand awareness isn’t as important to Transact’s intermediated business, it may lead to a boost.
A listing may also help Transact re-invest in the business. Transact executives make a strong case that they continue to invest in their technology but a listing should allow them to invest further.
On the flip side, I question whether Transact will continue to offer the high level of service it is famous for. Top notch customer service has distinguished Transact and a new breed of shareholders might not tolerate the associated costs. PLCs are famous for having a short term focus. Excellent service is an investment for the long term.
There is also a risk of turnover in the senior team. Ian Taylor is famously the longest standing platform CEO in the UK. (You can read the profile I did on Ian last year here). I don’t doubt there is a strong bench at Transact but potential investors will want to scrutinise that bench closely.
Finally, there is the question of loyalty of the IFA community. Transact is in part owned by financial advisers. These adviser-shareholders have been loyal fans of Transact and have recommended the platform to their investor clients. Could this dynamic change? Transact can certainly continue to win fans. Many advisers that aren’t shareholder use the platform. But I think it’s a question investors should ask.
Whatever the outcome of the listing, it is good news for Transact shareholders and I think good news for the platform market as a whole.