Reshaped Insignia attractive to PE

ANALYSIS

Given its share price and strategic outlook It was only a matter of time before a major private equity player made a bid for Insignia Financial.

The fact that Bain Capital was on Friday confirmed by Insignia as having made a confidential, preliminary, non-binding and indicative proposal represents the start of what is likely to be a somewhat long-running story.

Those who have been closely monitoring the fortunes of Insignia Financial since Scott Hartley took the helm in February know that he has already overseen some significant cost-saving measures, not least hiving off the bulk of Insignia’s financial advice exposure in Rhombus Advisory and, more recently, outsourcing the heavy technology and administrative costs of superannuation via deal with SS&C.

Hartley has also zeroed in one of the core benefits of Insignia’s 2021 acquisition of MLC Wealth from National Australia Bank – the consumer recognition value of the MLC brand.

The Insignia chief executive has made clear that MLC will be a significant go-to-market retail brand for the company’s retail-focused operations.

Hartley’s arrival at Insignia has certainly made a difference to the company’s share price, but it is worth reflecting that in January 2020 Insignia’s share price under the old IOOF brand was $7.56 and on Friday it was struggling to head north of $3.55 notwithstanding news of the Bain bid.

Many of Insignia’s troubles have been attributable to fall-out from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the ambitious scale of its acquisition of the MLC Wealth business and then the ANZ Pensions and Investments business.

Indeed, the challenges associated with bedding down and then driving efficiencies from two such large acquisitions are regarded have having played a role in the late 2023 exit of Renato Mota as chief executive.

With much of the hard yards already done and with a solid strategy taking shape it is clear private equity see value in a wealth management business of the scale of Insignia.