CMA stops merger between fintech firms

The Competition and Markets Authority has temporarily called off the planned merger between FNZ and GBST, ruling that the two platform technology firms were “close competitors” in a “concentrated market” where smaller firms face significant barriers to entry. 

The buyout between GBST and FNZ would have been worth £220m. The deal was agreed in the summer of 2019, with the competition watchdog beginning its investigation in November. FNZ now has five days to address the CMA’s concerns to avoid a more in-depth investigation from going ahead.

The platform technology industry is dominated by larger firms: FNZ, GBST and Bravura are the three main players and provide over 70% of assets under management in the market. The CMA also found that GBST was one of the only firms that could challenge FNZ’s market power in the supply of platform technology servicing, in which it had a particularly strong position. The CMA concluded that if the merger had gone ahead it would likely result in “higher prices, fewer options and less innovation”, with clients of the two firms left in a weak negotiating position where prices could rise. 

The senior director of mergers at the CMA, Joel Bamford, commented: “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.”