Advisers and platform specialists say Legal & General’s acquisition of Cofunds is proof of how difficult it is for platforms to build value.
L&G this week acquired the 75 per cent of Cofunds it did not already own for £131m following months of negotiations between the businesses.
The deal values the platform at £175m, to be paid for from L&G’s cash reserves.
Cofunds is currently the largest platform in the UK with around £50bn in assets.
The Lang Cat principal Mark Polson says: “This shows the squeeze in margins platforms face. When you consider that it has £50bn in assets under administration, the value of the business is nothing compared to that.”
Bloomsbury Financial Planning partner Jason Butler says: “The deal shows that platforms and fund groups are becoming increasingly squeezed and need strong financial backing.”
Yellowtail Financial Planning managing director Dennis Hall says: “I think it will take L&G a long time to recoup its money from this deal even though the sum paid is less than many people expected.”
Chelsea Financial Services managing director Darius McDermott says: “Cofunds has had to concentrate on the advisory side of the business, readying for RDR, and we hope that this now means some committed resources and renewed focus on their execution-only area, particularly in respect of the pension offering.”
L&G acquired the remaining stake from International Financial Data Services, Threadneedle, Newhouse Capital Partners and Jupiter. Cofunds will form a new business unit within L&G’s retail savings division and retain its branding.
There has been no confirmation on whether all the Cofunds management team, led by Martin Davis, will move across.
L&G chief executive of savings Mark Gregory says: “We have worked with the team over a long period and recognise the excellent value and customer service the platform provides. We look forward to working with them to growthe business.”