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Takeover speaks volumes

Sesame’s proposed takeover of Bankhall will create a massive distributor with 3,000 appointed representative and 1,500 directly authorised firms but questions remain over how the businesses and personalities will gel together.

News of the deal was quickly followed by murmurs that PMS managing director John Malone was furious at being excluded from negotiations and could be planning to leave the business.

But despite the integration challenges being thrown into the spotlight at such an early stage , commentators say the scale of the combined group will give it muscle in the distribution sector.

Ernst & Young financial services director Malcolm Kerr says: “It will be a very substantial business and size does matter in this area. They will be stronger together than they are separately.”

Kerr believes that the enlarged group will face a new challenge as networks and support services groups will no longer be able to sell themselves on the basis of securing higher commission for their members as they have done in the past.

He says: “Obviously, that cannot continue so they will need to change their model. It will be interesting to see whether they will be able to move from generating increased commission payments for members to getting increased benefits for clients.”

From a mortgage lender’s perspective, dealing with supersized distributors can be an advantage but there is also the threat that they can become too powerful, according to Stroud & Swindon sales and marketing director Linda Will.

She says: “When you do not have a large amount to lend, it is good to align with big distributors who can manage your funds as you want. But in the future, when money is flowing more readily, the super-distributor may have more power to pick and choose who they have on their panel. If there were a threat to smaller lenders it would be that in the future a super distributor could control the majority of introducers in the market and have a lot of buying power.”

Finance and Technology Research Centre director Ian McKenna says the merged group will also hold sway in the investment market, with knock-on benefits for clients.

He says: “Think of the potential buying power of that organisation in terms of negotiating prices with fund managers. Sesame and Bankhall each individually were in a very, very strong position to negotiate terms for their prospective members but with the two together you have a very powerful volume in that respect and that can actually play a very positive role for consumers in driving down price.”

McKenna says there are likely to be integration issues with combining the two businesses but this is inevitable in any big merger.

Bankhall’s entry into the platform market last year with the launch of Portavista throws up another conundrum for the firm’s potential new owners. Capita, which provides the Portavista platform to Bankhall as a white-labelled version of its Enabler software, is not marketing the platform to new providers, leading some to question how successful the launch has been. Would it therefore make sense for Sesame to build on Portavista or does it have ambitions for its own platform?

McKenna says: “If Bankhall needs to replace Capita as their partner in Portavista, that is the deal that in many ways every platform provider is going to want to get because there is so much volume. “

Sesame sales and marketing director Steve Young says he is positive about the role of platforms in the post -RDR world.

He says: “We have been very quiet on platforms in the past because we have not seen anything yet that matches what IFAs need but we are looking at how the market emerges. We will explore with Bankhall and Capita what their plans are with Portavista.”

In terms of the motivation of the life companies behind the deal, rumours that Sesame is set to pay just £1 for Bankhall have fuelled speculation that Skandia was desperate to offload the business.

Nucleus chief executive David Ferguson wonders whether, given Friends Provident’s previously stated desire to offload its other distribution businesses, it could be preparing Sesame for a sale.

He says: “Maybe they are going to repackage it and sell the whole thing on again and believing that the extra scale Bankhall brings will make it more saleable as an asset.

“From Skandia’s point of view, I think if a business is loss-making and not core, you would just want to get rid of it in the current climate. Skandia paid an incredibly fat price for that business, I think they paid well in excess of £200m for it and it has clearly delivered nothing for them either strategically or economically.”

Sesame says it will keep the Bankhall and PMS brands, merging is own support services and mortgage club into these. As for redundancies resulting from the possible takeover, Young says it is too early to say, although he dismisses the idea of a joint chief executive structure like that which followed the Lighthouse/Sumus merger.

Young says: “We still have to work out how we will man- age personnel as part of the integration.”

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