CMA provisionally blocks FNZ/GBST merger

Following an in-depth investigation, the Competition and Markets Authority (CMA) has provisionally blocked the merger of FNZ and GBST.

Retail investment platform FNZ purchased its rival GBST in November 2019 for around £150 million, resulting in scrutiny from the regulator due to their significant presence in the UK market.

Following an in-depth Phase 2 investigation earlier this year, the CMA has provisionally found that the deal could result in a substantial lessening of competition, with UK consumers who rely on investment platforms facing higher costs and lower quality services.

The merged business would be by far the largest supplier in the UK, holding close to half of the market share. Although there are differences in the business model that the two companies use, with FNZ providing an integrated software and servicing solution and GBST being a software-only provider, the CMA stated that they compete closely in a concentrated market in which there are few other significant suppliers.

In particular, the CMA’s investigation found that FNZ and GBST have competed consistently against each other in recent tenders to supply major investment platforms in the UK and that customers view them as close alternatives.

The investigation provisionally found that the merged business would face limited competition, with only one other supplier - Bravura - offering similar capabilities.

Switching retail investment platform solutions is an expensive and complex process, the CMA noted, adding that the reluctance of customers to change suppliers, as a result of the risks involved, can make it difficult for smaller or less well-established firms to enter or scale up in the UK.

In reaching this provisional decision, the CMA analysed a wide range of evidence looking at how closely these firms compete, including tender data and the companies’ internal documents. It also engaged with customers, competitors and other stakeholders to inform its findings.

The CMA has set out potential options for addressing its provisional concerns, which include requiring FNZ to sell all or part of GBST.

Views are invited on the provisional findings by 25 August and on the notice of possible remedies by 18 August.

Martin Coleman, chair of the CMA inquiry group, said: “The evidence we’ve seen so far consistently points in the same direction – that FNZ and GBST are two of the leading suppliers within this market and compete closely against each other.

“That’s why we’re concerned that their merger could lead to investment platforms, and therefore indirectly millions of UK consumers who hold pensions or other investments, facing higher fees and lower quality services.”

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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