David Carrick, CFO at financial services provider Apex Group explains how the pursuit of an ambitious M&A strategy has grown the group’s product range and its geographic footprint
Global financial services group Apex has its roots in fund administration. It offers fund, financial, and corporate solutions to asset managers, financial institutions, corporates, and multinationals. It also offers a range of related services, such as depository services and global custody.
The business has expanded rapidly since it was founded in 2003 through a mixture of double-digit organic and inorganic growth, and now employs 12,000 people across 94 offices worldwide.
During the last five years, Apex Group has made over 40 acquisitions on six continents. One of its more notably purchases was Sanne Group, a leading global provider of alternative asset and corporate services.
Its acquisition of Sanne positioned Apex Group as a global, top-tier independent service provider, servicing nearly $3 trillion in assets. It also added six new locations to Apex’s geographic footprint: Denmark, Japan, Serbia, South Africa, Spain, and Sweden; as well as 2,500 people to its business.
In 2023 alone, Apex Group has announced five acquisitions including, most recently in April the planned purchase of the business divisions of UK-based MJ Hudson. The law firm offers services inclusive of environmental, social and governance (ESG) assessment, management company (ManCo) services, quantitative solutions, and investment advisory.
Apex’s CFO, David Carrick, says the group’s ambitious acquisitions strategy has been driven by plans “to strategically augment its range of solutions, new technologies and geographic footprint”.
“These acquisitions – including the transformative addition of FTSE250 Sanne Group last year – have enabled us to bring a new era of service to asset managers and allocators,” he says. “Our M&A strategy has been essential for the business to evolve into a technology and data-driven services company.”
Carrick notes discipline has been key to the group’s M&A thinking.
“Apex Group’s acquisition strategy, whilst flexible enough to accommodate opportunistic situations, remains laser-focussed on only acquiring quality businesses which add a specific product, technology or geography for our clients,” he says.
“The rationale behind every acquisition must fall into at least one category: either to increase our capabilities so that we can continue to deliver the broadest range of solutions in the market to our clients and/or to expand our geographic reach so that our clients can benefit from partnering with Apex Group – no matter where they are in the world.”
There are several factors that Apex considers when considering M&A targets including the integration of the target company and its cultural fit. “Lack of cultural cohesion is perhaps the most common cause of deal failure,” says Carrick.
“Every deal is different – but a smooth integration strategy and robust implementation model are essential to achieving a value additive transaction, not to mention keeping current – and prospective – employees and clients happy.”
Carrick points out that Apex’s longstanding M&A strategy means the group has now gained significant insights into doing deals and unifying companies. He notes planning, something which can be overlooked, should not be left until “the deal is done.”
“It is important to consider the integration strategy as part of the deal process. At Apex Group, we have a robust integration model which takes shape prior to closing, so all workstreams – including the finance department – understand their roles through detailed, yet flexible, project planning,” Carrick explains.
Planning ahead and putting people first has enabled Apex Group to successfully integrate its acquisitions without losing a material client as a result of an integration decision.
“By being technology agnostic, we can ensure we meet client needs through integration processes,” Carrick says.
Apex Group first embarked on is acquisitions strategy after attracting additional investment in 2017 from Genstar, a San-Francisco based private equity firm.
Genstar saw Apex as being in a strong position to consolidate the fragmented fund services industry. It then obtained further investment from Carlyle, TA Associates and Mubadala in 2022.
Carrick explains that the group has funded its acquisitions primarily through syndicated debt but, when warranted, uses preferred debt and/or common equity. “The blend of each of these obviously are dependent upon market conditions and the merits of each target acquisition,” he says.
Since the pandemic, many acquisitive companies have found themselves operating in a more difficult economic climate as a result of rising interest rates, persistent inflationary pressures and fears of recession.
This has fed into the M&A market. According to data from the Institute for Mergers, Acquisitions & Alliances, there were nearly 58,000 acquisitions worldwide in 2021 but this fell below 50,000 in 2022.
However, Carrick believes that the first few months of 2023 did see “sustained and consistent global M&A activity levels”, although it faltered when the banking sector witnessed a confidence crisis in March and financing tightened, dampening asset valuations.
Despite this, the group has announced the acquisition of MJ Hudson and PFS (Paxus)in the UK; Efficient Group – BCI & BCP in South Africa; BACSIL (Bank of America Irish depositary business) in Ireland; and Alfi Partners in Luxembourg.
“Undoubtedly the market had become accustomed to the low-interest rate environment, enabling acquirers to raise debt efficiently and be supported by the substantial amount of ‘dry powder’ raised by private equity,” says Maxwell Johnston, head of M&A at Apex Group.
“Against this backdrop, we have seen that sale processes for assets have become more protracted – favouring acquirers who are able to move quickly and have an established track record as a ‘known quantity’ that reassures financial backers and provides much-needed certainty.”
Johnson adds that in the current macro-economic environment, opportunities for organic growth are potentially slowing, but that M&A activity can deliver growth and scale, as well as access to new markets, products, and technologies.
“At a recent European investor conference, more than half of the participants said they expect to increase their M&A activity or consider transformative deals this year,” he says.
Among the factors bolstering cautious optimism in M&A markets for the second half of 2023 is “an acceptance of new valuations” and a path to more “normalised monetary policy that is encouraging the opening of credit markets”, according to Johnston.
“We have seen some private equity (PE) investors pause activity, with this temporary hiatus opening up new opportunities for strategic acquirers who are able to raise financing quickly,” he says.
“With reduced competition from PE acquirers, there has been some moderation in valuations, enhancing the attractiveness of some assets.”
