Private equity firm Synova has bought a majority stake in 3173 – the group that includes Dalriada Trustees, Mantle Hosting and Spence & Partners – for an undisclosed sum.
The deal will see Synova take an 80% stake in 3173 - buying the stake from the firm's owner directors Brian Spence, Neil Copeland and David Davison.
Spence will retain a significant stake in the business after the transaction, continuing in his role as chief executive. Neil Copeland and David Davison will exit as shareholders after the deal but remain with the business as consultants.
The deal is subject to Financial Conduct Authority clearance, which 3173 said it expected to receive in the coming months.
3173 said the partnership with Synova would facilitate the next phase of the group's growth in what was an increasingly competitive pensions and financial technology industry.
Spence explained the investment would help take 3173's businesses to the next level.
He said: "The business has grown tremendously and we've got three very strong brands, three very strong businesses but, as time goes on, you need more investment than individuals can easily provide.
"This deal was an opportunity to take the business to the next stage in terms of our three brands."
Synova managing partner David Menton added: "We are delighted to be partnering with Brian and the rest of the team at 3173 to support the growth of the company. Investing in fast-growing, founder-owned businesses with a unique technology proposition is central to Synova's investment philosophy. We look forward to the next exciting phase of their growth."
Spence added Synova's investment would help all three parts of 3173's business to grow - helping Dalriada grow further and more quickly against the backdrop of a consolidating but fast-growing market for trusteeship and governance services and also allowing Spence & Partners to enhance its position in the market and broaden its range of services.
He noted the new capital would also help 3173's fintech offering Mantle achieve the required scale.
Spence added: "3173's innovative Mantle software platform is unquestionably an incredibly powerful fintech product, it is the most well-developed combined pension scheme administration and actuarial platform anywhere in the world. The new capital will help it to achieve required scale."
Spence said the deal with Synova would also allow 3173 to look at expanding its Mantle offering globally.
He told PP: "Mantle's unique not just in the UK, but actually worldwide. And one of the things that we just did not have the resources to do was to potentially explore markets outside of the UK for Mantle - the UK is going to be the major part of our business, but we're also hoping as part of the investment to start looking at other markets, especially in North America where we know there are opportunities for very similar types of software that combine the administration and actuarial functionality."
Spence said he believes the pensions industry has "lagged" when it comes to giving members and trustees the digital tools they need.
He explained: "As a pension scheme member, if you want to get a transfer value you send off and you wait for months for it, whereas for the schemas we have on Mantle, that functionality is there online. If you're a trustee of a pension scheme, you should be able to know what your funding position is, what your cashflows and hedging ratios are and so on - that should all be available in real time.
"The schemes that we have on Mantle system can access this as can our clients, the other actuarial firms who provide it to their schemes. There isn't there isn't another system capable of doing it."
Spence added that Mantle was also a key part of Dalriada Trustees' bundled offering for smaller schemes, a service it is calling ‘A Better Way'.
He said the service - mainly orientated towards smaller defined benefit schemes - was not consolidation in terms of legally merging schemes, more in terms of managing then as a portfolio of schemes in a more efficient way.
Spence said: "We now have slightly more than 20 DB schemes on Mantle within Dalriada and are anticipating growing this part of our business, particularly at the smaller end of the market."
He said this "consolidation-lite" solution was another example of how 3173's business was "tech enabled".
Spence added: "We see our whole group as being tech enabled in an industry where the tech is generally a bit flaky at times."
About the deal
David Menton and Sunil Jain led the transaction for Synova supported by Matthew Charman, Charles Dale and Mao Isobe. David Menton and Sunil Jain will join the board of 3173 subject to regulatory approval.
Advisors to 3173 were Beltrae (corporate finance), Grant Thornton (financial and tax due diligence), Cardano (commercial due diligence) and A&L Goodbody (legal).
Synova was advised by EY (commercial, financial, and tax due diligence), Pinsent Masons (legal), Alvarez & Marsal (tax), MacRoberts (tax) and Endava (IT).