We have produced a special blog to cover our thoughts on the proposed acquisition of Focus Solutions by Standard Life and it’s also been published by IFA Online.
AT8 has commented several times over the last year on the increasing numbers of mergers and acquisitions (M&A) amongst the suppliers of IT services and software. In the Mortgage market we saw the merger of Trigold and Crystal (who continue to be subject of rumours of further M&A activity) and the acquisition of N4 by 1st The Exchange.
The latest proposed takeover was announced this morning and it was a slight variation on the M&A activity seen to date, namely a Product Provider – Standard Life – acquiring Focus Solutions, one of the leading Financial Services e-commerce companies.
Focus is a company well know to AT8, not least because I and my fellow directors worked there for a period. It is a company that has transformed itself in recent years from a supplier of bespoke Point of Sales (POS) systems, to a supplier of what it claims, is a ‘whole of office’, packaged solution, – ‘Focus 360°’. In the past, AT8 has written about Focus 360 several times. Put simply, its front office capability is market leading with good functionality, strong IT architecture and high usability. Its back-office functions are still a little behind the market but based on the same sound architecture and with the same intuitive look and feel. The product has had some notable successes in recent months including deals with AWD, Tenet and Barclays.
So why the Standard Life takeover and what will it mean for the market?
Standard Life is clearly making a strong play to address the whole of the distribution value chain. Through adding together a technology solution, its Wrap Platform and the threesixty service network it claims it can support a high quality customer experience through efficient and compliant processes.
Behind Standard Life’s high level statement I also believe there is a desire to work closely with the banks. Focus’ strongest market has been the Bancassurers. It won deals with Barclays, HSBC and Bank of Ireland. Standard Life will have seen its investment proposition increasingly commoditised in this area and having a straight through proposition will no doubt help it differentiate itself.
For Focus the attraction is the access to capital to accelerate its product development. The availability of funds will help them address the shortfalls in their back-office capability but the main driver will be to accelerate its international ambitions. Standard Life’s presence in overseas markets, its capital and corporate backing will help drive this.
Closer to home though, Focus and Standard Life may have more problems. Several of Focus’ clients and prospects are Product Providers themselves and they may be unsettled by the acquisition. Focus will try and reassure them that it is being run as an independent organisation and to be fair it can and probably will address a number of potential concerns through contractual terms (confidentiality agreement etc). However, will other Product Providers buy from Standard Life?
Distributors will also be nervous. Many hold their independence dear and will be nervous of tying up with a Product Provider owned company for their technology needs. The FSA has stated that distributors can use technology from Product Providers but must be clear that it provides no bias, which will make some nervous, also. Buying and rolling out a Practice Management solution is a strategic decision not easily undone. If the supplier starts to introduce bias or drop service levels it is not a quick process to disengage, so many may not want to take the risk up front.
Both Standard Life and Focus also have to address competitor’s nervousness around the integrations that are necessary to both parties. Standard need integrations with as many of the Practice Management systems as possible and Focus need integrations with as many Product Providers as possible. Other Practice Management systems and Product Providers might well decrease the priority of integrating to either Standard Life or Focus.
The proposed acquisition does bring together some powerful entities in the e-commerce market. Standard Life has led the way in recent times in identifying gaps in the value chain and using technology to fulfil them. Several times previously it has shown itself to be close enough to the IFA business models to see how to best add value. The creation of the Wrap and the purchase of threesixty are good examples. In Focus it may well be continuing this process. The front office technology it has certainly fills a strategic gap in the market and does so better than most, if not all. The big question though is whether there is stomach in the market for a Product Provider owned technology vendor. Standard Life tried this once before when they acquired the POS vendor called Fame and this damaged Fame so significantly that it was eventually driven out of business. Focus does appear to be a more robust business proposition than Fame and its Bancassurance client base gives it great resilience. Whether it can continue its new business success under the new ownership will be interesting to watch and see.
