Regulatory due diligence

We have advised on some of the biggest acquisitions in UK financial services. In the wealth management sector alone we’ve provided regulatory due diligence for deals worth over £2.5 billion in the last couple of years.

With experience across the industry, from venture capital to investment management to consumer credit to payments, we are uniquely placed to support M&A in FCA-regulated firms. We work closely with investors – whether they’re private equity or established firms looking to grow or consolidate. And we understand firms who are looking for investment and preparing for their next chapter.

A thorough review by regulation specialists

We bring expertise, experience, and resources when you need them. We look under the bonnet and give you a candid view of both the current compliance of a target firm and the wider regulatory landscape in which they will operate post-acquisition. Or if you’re looking for investment we can help you prepare and protect the inherent value in your business.

We understand the nuances of ever-changing regulation – both in the UK and globally. We have hands-on experience of similar firms and similar situations. We can identify inherent risks in the current and future business. We have specialists in some of the trickier areas people get wrong – like liquidity and financial crime. We can help you make better informed decisions and, in some cases, re-negotiate terms based on what we find.

Where we uncover issues, we can work with you to fix them, whether as part of the transaction or later on down the line. We can manage the regulatory practicalities of Variation of Permission and Change in Control. And if you need, we can provide ongoing compliance support once the transaction is complete.

Our approach to regulatory due diligence

We work in partnership with you and any legal advisers taking a proportionate and pragmatic approach to assess the key risks which have the potential to drive future regulatory costs, including redress exercises, customer complaints, regulatory action or the cost of developing appropriate control framework within the acquired firm.

We take time to understand the proposed acquisition, including the how you propose to structure this (asset purchase or an equity purchase), how the target firm’s business model aligns with your own. Based on these discussions we advise you of the key risk areas on which you should focus the due diligence process.

After completion of the review, we produce a report detailing any findings we have and the materiality of these. We will discuss the findings with you and advise on mitigating actions you could take. We can also provide an integration and improvement action plan to help you integrate the firm into your business and improve any areas we have identified as likely to continue to accrue regulatory risk.

Where you decide to go ahead with your acquisition, we can help with any regulatory applications and changes you wish to make within the acquired firm.

In our experience no regulatory due diligence project is the same – but the process is likely to include some of the following elements:

• Business model and risk analysis
  • Business model analysis
  • Identifying key strengths, weaknesses, opportunities, and threats
  • Analysis against industry best practice and peers
  • Analysis of business register and the risk profile of the firm business
• Governance, culture, and senior management assessment
  • Senior management evaluation – including alignment to SMCR
  • Risk governance and committees evaluation
  • Resource and skillset assessment and responsibilities mapping for regulatory duty
  • Company culture assessment
  • Oversight activities and management information
  • Diversity and Inclusion assessment in line with evolving FCA/PRA requirements
  • Three lines of defence analysis
  • Risk and compliance function review
• Controls and compliance evaluation
  • Suitability and appropriateness file reviews, including defined benefit pension transfers
  • Professional Indemnity Insurance cover assessment
  • AML risk framework evaluation and financial crime controls
  • Training and competency assessment
  • SMCR fit and proper checks
  • Complaints history review
  • Review of appropriate authorisations and permissions
  • Review of the firm’s regulatory capital position and any impact this may have on an acquirer
  • Financial returns and prudential compliance
  • Review of previous FCA interactions
  • Client money and client assets controls analysis
  • Assessment for compliance with Consumer Duty
  • Compliance policies and procedures review
  • Third-party agreements and client agreements
  • Compliance infrastructure and oversight assessment
  • Evaluation of any regulatory change projects
• Analysis, reporting, and next steps
  • Alignment of findings against firm’s existing risk frameworks
  • Relative regulatory risk analysis per jurisdiction or service line
  • Impact assessment of M&A risks
  • Areas for further investment and expected capital outlay quantification
  • Indemnities negotiation support
  • Action plan for future business improvements

   

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