The FNZ-GBST union is under threat because a regulator has again determined that the union lessens competition.
FNZ may have to undo its acquisition of GBST because a regulator in the U.K. — the Competition and Markets Authority (CMA) — has again determined that the union of FNZ and GBST would “substantially lessen competition” and is reviewing “different remedy options to address these concerns,” CMA officials say.
GBST provides the Syn~ suite for automating middle and back-office trade processing for banks and brokerage firms. Its other offerings serve wealth managers, retail brokers, custodians, and margin lenders, officials say.
FNZ officials describes their company as “a global provider of transaction and custody services to support” the investment platform sector of investors and advisors that trade in “funds, shares, bonds and other securities.
While nixing the acquisition, CMA officials are suggesting that FNZ may buy back parts of GBST that serve institutional capital markets rather than retail markets, which has been the crux of the controversy.
This latest move in the ongoing saga of the FNZ-GBST merger follows CMA officials announcing in December 2020 that they would revisit their initial veto of the acquisition after FNZ officials took their case to the Competition Appeal Tribunal (CAT).
FNZ officials challenged the CMA’s assertion that “FNZ’s acquisition of GBST Holdings Limited (GBST) … resulted or may be expected to result in a substantial lessening of competition in the UK market for retail platform solutions and that the appropriate remedy is a full divestment of GBST.”
The tribunal published the appeal on Dec. 18, 2020, and by Christmas Eve, the CMA had agreed to give the case a second look. The FNZ acquisition of GBST was finalized by November 2019 after a fierce bidding war during the summer of 2019 that involved FNZ’s competitors Bravura Solutions and SS&C Technologies.
CMA officials have review the CAT appeal and say that “ competition concerns remain about FNZ’s purchase of GBST … The CMA has provisionally found that a deal between FNZ and GBST would raise significant competition concerns, following its re-examination of available evidence.”
The CMA says that independent CMA panel members found “that the purchase of retail investment platform solutions provider GBST by rival firm FNZ could substantially reduce competition. The CMA is concerned that this could lead to investment platforms — and therefore UK consumers who rely on these platforms to administer their pensions and other investments — facing higher costs and lower quality services.”
The CMA panel reviewed “additional and updated evidence submitted during the remittal,” officials say. “The CMA’s findings are based on the companies’ own tender data and internal documents, as well as information provided by customers, competitors and other stakeholders. … The CMA inquiry group carrying out the investigation has therefore provisionally concluded that the deal would substantially lessen competition and has considered different remedy options to address these concerns.”
The CMA’s original Phase 2 decision declared that FNZ would have to sell the “entire GBST business.”
However, after the new evidence submitted during the remittal, the group concluded that “current competition concerns would also be effectively and proportionately addressed by requiring FNZ to sell GBST, but with a right to subsequently buy back a limited set of assets from GBST relating to its capital markets business. These assets would be restricted to those that do not affect GBST’s competitiveness in the supply of retail investment platform solutions,” according to the CMA.
“Based on the latest evidence, we have come to the provisional conclusion that a merger of FNZ and GBST would significantly decrease competition in the retail investment platform solutions market,” says Martin Coleman, chair of the CMA inquiry group, in a prepared statement. “The reduction of competition in the market could lead to higher prices or poorer service for retail platforms to the ultimate detriment of UK consumers who hold pensions or other investments that are managed by these platforms.”
The CMA is allowing for industry participants to send their feedback on “the provisional findings and on the proposed remedy being considered by the CMA by 30 April 2021.”
A spokesperson for FNZ, which is based in Edinburgh, Scotland, tells FTF News: “FNZ notes that the Competition and Markets Authority (CMA) has published its latest report as part of its ongoing review of FNZ’s acquisition of GBST, now well into its second year. We have no further comment at this stage.”
GBST officials based in Brisbane City, Queensland, Australia, did not respond to inquiries by deadline,
The latest CMA press release can be found here: https://bit.ly/3dBhFuW, and a history of the case can be found here https://bit.ly/2LD8xui
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