FNZ sees £150m deal blocked over competition fears

● CMA concerned over market impact ● Could force sale of some or all of GBST

Scottish fintech FNZ could be forced to sell the rival it bought in a £150 million deal last year over concerns by competition watchdogs.

The Competition and Markets Authority (CMA) has provisionally blocked the merger of platform firms FNZ and GBST following an in-depth investigation after it flagged initial worries earlier this year.

It fears that the deal could lead to investment platforms, and ultimately millions of UK consumers who hold pensions or other investments, facing higher fees and lower quality services.

Potential options set out by the watchdog to address its concerns include requiring FNZ to sell all or part of GBST.

Edinburgh-headquartered FNZ yesterday said it had “no comment at this stage” on the provisional findings. It has until later this month to respond to the CMA.

It purchased Australian-listed GBST in November 2019. Both companies have a significant presence in the UK, where they are two of the leading suppliers of retail investment platform solutions.

The CMA said the merged business would be by far the largest supplier in the UK, holding close to 50 per cent of the market.

Although the watchdog said there are differences in their business models, with FNZ providing an integrated software and servicing solution and GBST being a software-only provider, it said “they compete closely in a concentrated market in which there are few other significant suppliers”. It said: “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.”

Martin Coleman, chairman 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.”

The CMA is now inviting comments on the provisional findings and remedies.

FNZ was founded in New Zealand in 2004 by chief executive Adrian Durham, but quickly expanded to Scotland in 2005, establishing a headquarters in Edinburgh’s Tanfield, the former home of client Standard Life. It now employs around 500 people in Edinburgh and serves more than 60 of the world’s biggest financial institutions, with responsibility for £400 billion in assets under administration for around eight million customers.

The company became the first Scottish-based fintech firm to achieve “unicorn” status in October 2018 after an investment deal valued the company at £1.7bn.