The premium finance market is ripe for further acqusitions following Close's move on Amber Credit
Does Close Premium Finance’s acquisition of smaller rival Amber Credit sound the starting gun for further M&A activity in the sector?
Close PF’s chief executive Bob Golden believes so, as he this week declared that the company hoped to make further acquisitions this year.
A likely target is the premium finance arm of Kaupthing, Singer & Friedlander (KSF) – along with the rest of its asset finance [check div] – is already in play, after being put up for sale by its parent.
Close is thought to be keen to buy it and has already made its interest known to Kaupthing bosses.
KSF is the third largest premium finance provider in the UK and a successful bid would help Close edge nearer to rival and market leader Premium Credit.
Golden says that the pressure for consolidation within the premium finance sector will increase. He argues that the small and medium sized players do not have the scale to provide the level of service required by an increasingly consolidated broking sector.
The larger brokers, he says, require slick, automated processes and expect their premium finance suppliers to offer that. The smaller premium finance houses do not have the resources to invest in the necessary technology and hence the pressure to sell to larger rivals.
The question is: given the current turmoil within the banking sector, of which the premium finance market is a part, will there be an appetite for acquisitions?
Close PF, and its parent Close Brothers, has already demonstrated that it can do deals at this time and Golden is adamant that it has the resources to do further.
Will Close’s major rival, Premium Credit, be able to follow suit and look for its own acquisitions? Given the trading losses that its parent Bank of America has recently posted, this may be unlikely.
Does this leave Close as the lone buyer in the premium finance sector? Not necessarily. There is scope for a company outside the sector to buy its way in – indeed over the last year there have been rumours of an insurer buyer stalking the market.