The Competition and Markets Authority (CMA) has raised concerns that the loss of competition brought about by the merger of FNZ and GBST could result in UK investors losing out as a result of higher prices, fewer options and less innovation.

FNZ purchased rival investment platform provider GBST in November 2019 for around £150 million, ending a three-way battle which also included Bravura and SS&C and saw a 94.9 per cent premium to the closing price of the company’s shares in April, when Bravura made an initial approach.

After completing its initial Phase 1 investigation, the CMA found that FNZ and GBST were close competitors in what is a concentrated market with few other significant suppliers. Smaller or less well-established firms find it difficult to enter or scale up because of the risks and reluctance of customers to change suppliers.

As part of its investigation, the CMA undertook extensive market testing and looked at evidence from a number of third-party stakeholders including investment platforms, external consultants, competitors and industry bodies. It also examined the companies’ internal documents and assessed the extent of competition in recent tenders in this sector.

Joel Bamford, senior director of mergers at the CMA, said: "Investment software is critical to the operation of retail investment platforms which are used by many investors in the UK.

"FNZ is already the largest supplier and has purchased an established rival who is trusted by many platforms, with few remaining competitors left in the market; we are therefore concerned that this transaction could lead to customers losing out."

FNZ must now address the CMA’s concerns within five working days. If it is unable to do so, the deal will be referred for an in-depth Phase 2 investigation.

A recent FStech feature went in depth into the trend around outsourced technology platforms that underpin the UK’s wealth and asset managers being increasingly key to movement in the market, as mergers and acquisitions concentrate power among a handful of major players.

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