U.K. regulator, the Competition and Markets Authority (CMA), published on August 25 its Final Undertakings report on FNZ’s acquisition of GBST, and it spells out the next steps for the FNZ-GBST breakup.
The CMA wants this breakup because it has concluded that a combined FNZ-GBST would diminish competition in the retail investment platform solutions space.
This case is under the jurisdiction of the CMA as FNZ is based in Edinburgh, Scotland, and GBST, based in Brisbane City, Queensland, Australia, compete in U.K. markets. GBST’s retail, wealth management business offers software to investment platforms “to support the provision of pensions administration and investment management services to consumers,” as the CMA noted previously.
But rather than simply split off GBST from FNZ, the CMA is allowing FNZ, a wealth management technology and investment administration services vendor, to conduct “a transparent sale” to divest itself of GBST and possibly buy back the pieces that do not threaten to reduce competition.
Unless there is another round of appeals and reviews, FNZ will most likely be selling off the retail-oriented, wealth management solutions from GBST. The ultimate purchaser of the retail GBST offerings and the final sales agreement will be subject to CMA’s approval.
FNZ has the right to buy back the non-retail, post-trade offerings of GBST such as the popular “Syn~” solutions.
Thus, it’s possible that GBST’s post-trade solutions may be available for purchase by FNZ (or another CMA-approved provider):
- Syn~TAC: For middle-office trade processing across multiple asset classes;
- Syn~Ops: For automated clearing, settlement, and asset servicing;
- Syn~Ops Custody: For custodians that want to offer automated settlement and asset servicing to their clients;
- Syn~Finance: For centralized and automated post-trade financial operations and reporting obligations;
- And Syn~FTT: For processing financial transaction taxes (FTT) calculations and payments that need to comply with authorities across the globe.
The final report includes an annex that “forms the basis of negotiating parameters for which FNZ may engage prospective purchasers of the GBST business,” according to the CMA document.
Essentially, the CMA is saying that the FNZ can market GBST and its wares and potentially buy back:
- All capital markets customer contracts;
- The defined list of core proprietary capital markets software, “including the source code of and IP in that software;”
- And any other shared assets such as technical staff and subject matter experts “used by the Global GBST Capital Markets Business that a purchaser does not wish to retain, provided that this does not adversely affect the competitiveness of GBST’s Global Wealth Management Business.”
The CMA “will not approve the reacquisition if it considers the burden that the related reacquisition process … places on the Global GSBT Wealth Management Business resources would have an adverse impact on the operation or competitiveness of the Global GBST Wealth Management Business. Additionally, the CMA will not accept a proposal that would likely distort competition in any market,” according to the regulator.
FNZ officials will have to inform the CMA of :
- Any “shortlist of potential purchasers being drawn up for which it intends to seek the CMA’s formal approval against the purchaser approval criteria together with details of all other bidders that have lodged a formal bid with FNZ;”
- An explanation of why interested companies “have not been shortlisted;”
- “A draft sale and purchase agreement being agreed in near-final form to achieve final disposal;”
- And the ultimate sale of the GBST assets.
CMA officials will let FNZ know if a “potential purchaser is an approved purchaser within a reasonable time” if it has sufficient information about each potential buyer. The CMA will ask for more information if it decides that more is needed.
As of this writing, FNZ and GBST officials have not responded to multiple inquires from FTF News about the next steps, and the time frame for the next steps. CMA officials have not published any updates on the time frames or FNZ’s next move.
The situation immediately brings up many issues but one of the biggest is what role vendors SS&C Technologies and Bravura Solutions Ltd. might play given that they were suitors for GBST when FNZ was making its overtures. After all this time, would they want to re-engage once the transparent sales process starts?
And what will the industry make of a regulator so intimately involved in the disassembling of an acquisition, its divestiture, and then resale of key components? Is that too much government intervention in a private business matter?
One thing is for certain – the FNZ-GBST story still has lots of legs left.
The CMA’s full report can be found here: https://bit.ly/2Wx2yNa