The forces at work in the Trust & Corporate Services sector and their impact on M&A activity
Historically, the Trust & Corporate Services sector has been somewhat fragmented. However, the sector has undergone a wave of consolidation. The purpose of this article is to outline the reasons underpinning these developments, and to provide insights into what the future might hold for the sector.
From a highly fragmented market to the rise of local champions
The T&CS space has historically been populated by small and local operators. With barriers to entry relatively low and demand for services offered high, the opportunity for individuals with the right skill set and entrepreneurial flair to launch a thriving business was significant.
Throughout the 1990s and 2000s, Luxembourg saw several success stories based almost exclusively on a local presence.
Over the years, some M&A activity has appeared to be driven in part by: (i) the desire for a number of the earlier entrepreneurs to exit their business and monetise their life’s work, (ii) the opportunity to reap synergies and economies of scale on the operating side, and (iii) the opportunity to gain size and be recognised as a credible operator by large institutional clients.
The result has been the creation of a small number of local champions, followed by a long tail of small and medium-sized operators.
As these local champions become increasingly important, smaller operators have been faced with increasing pressure to either turn consolidator or sell to a competitor.
Inside magazine issue 5 – June 2014
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