Tom Broughton asks what Oval will do with its war chest
Oval is the last of the major consolidators waiting to acquire the war chest it needs to compete with the big players. As the new capital gains tax regime kicks in and with the appetite for city financing in the doldrums it is hardly surprising it is turning to its insurer investor, Allianz, to raise capital. So how much will Oval’s directors surrender to Allianz? The top line figure mooted is 25% or up to £50m. But will they then use the additional money raised to fund more and more acquisitions to compete with the likes of Giles or Jelf? Or will the directors just take the money and run? After all, it is feasible that Oval may see a more conservative optimum size for its broking group where it is still able to negotiate hard and manoeuvre freely in a volatile market. Allianz, meanwhile, will see the deal as part of its ongoing strategy to secure a distribution chain but ultimately be nicely positioned should it one day want to own a Venture Preference style business. After all, the regulatory landscape maybe relatively unclear but there are still plenty of insurers playing for position.
‘ And now that the industry has had a couple of weeks to digest the FSA’s latest consultation on commission disclosure and conflicts of interests, let’s be clear on what it is trying to do (see pages 20-21). First and foremost, this is a debate that will only end in increased regulation and costs. The FSA is trying to impose even more regulatory measures on the market, but attempting to appear whiter than white in the process. It ultimately wants forced commission disclosure, forced transparency of ownership and other admissions of deal tie-ups. But in this process it also wants the market to feel it it has tried to find its own solution through self regulation. While sizeable brokers will play ball to a certain extent, the smaller players in the sector have not got the time, money or resources to continually monitor regulatory change. Think Northern Rock and you’ll quickly see that the FSA will be fearful of a backlash from business. But this will only become a major problem if companies exploit their positions or if it affects price and service levels. Until then the FSA is just using a hammer to crack a nut.