Platform tech giant FNZ has taken a 9.1% stake in platform and Sipp provider Embark, New Model Adviser® can reveal.
FNZ has become a shareholder for the first time in Embark following a ‘small rights issue’, although the minority shareholding will ‘not carry any operational involvement, control, or oversight’, Embark said in a press statement. FNZ was the sole participant in the rights issue.
Alongside this new stake, Embark has extended its contract with the tech provider to power its adviser platform and pension administration services for the next five years.
In 2017 Embark launched a new retail investment platform on FNZ technology and the firm also uses FNZ to administer most of its Sipp book, including Hornbuckle and its white-label pensions for robo-advisers.
Phil Smith (pictured), Embark’s chief executive, said this deal was a natural step five years after the two companies first started working together and will provide certainty for the future of Embark.
‘For us what this brings is two things; absolute surety that our partner remains our partner – that is key [as] we have seen lots of issues around software change and replatforming. We are also very focused on the IPO of the company and our reflection was that not being a software developer in our own right means we need to demonstrate that software surety.’
He said although Embark does not need new capital at this stage, this stake gives it a further buffer when fears are growing of claims against Sipp providers across the market.
‘While we didn’t need the cash, it brings capital growth to us at a time when the Sipp and SSAS market is having a few wobbles. It means we are able to demonstrate exceedingly strong regulatory capital – although that was not the driver.’
Embark is privately owned with Smith holding a 8.5% stake and its non-executive director Richard Wohanka, a former chief executive of Fortis Investments, holding a 42% stake.
Smith said this deal does not change its ambitions to IPO and added the value of the stake, which he would not disclose, ‘puts us firmly on track for a very attractive listing price’.
‘Increasingly we share a huge amount of value with FNZ in IP [intellectual property] terms and points of contact. [So] it makes sense for us to be closer in our economic relationship but not so close that they are a regulatory controlling party which is the 10% threshold,’ Smith added.
Adrian Durham (pictured above), FNZ chief executive, said: 'We contracted in late 2013 with Embark when they were a small start-up player. We liked their ambition in the key retirement space and how they saw the platform market developing. Today they have over £15 billion in assets, much of which sits on our technology.
‘They have solid distribution relationships and the right proposition for the UK market, and we believe will emerge as long-term winners in a competitive sector. They are one of the growth engines of FNZ, but moreover a great partner in the ongoing development of our digital footprint and services to the wider market.’
This is not the first time FNZ has bought a stake in UK firms; last July it took a £1 million minority stake in adviser tech start-up Advicefront.
Last year FNZ’s private equity backers were bought out by two new private equity firms, valuing the tech provider at £1.7 billion.