Ann: IFL receives revised indicative non-binding proposals, page-134

Is the PE shootout for Insignia under threat? Markets think so. AFR Street Talk.

The ASX market meltdown sparked by Trump’s new tariff regime is sure to have its fair share of casualties on the M&A circuit. Will the first be Insignia Financial, which was put in play in December?

Street Talk understands Bain Capital and CC Capital’s dealmakers are busy wrapping their heads around the sharemarket volatility, which is a key factor for Insignia’s fee-earning assets. Of note, both parties were deep in due diligence as of Monday.

Insignia’s share price dropped 11 per cent in the first hour of trade on Monday to $3.50 per share, caught up in the tariff turmoil that put the fear of god into traders and investors alike.

Last trading at $3.70 per cent, that leaves a 37 per cent gulf between the trade price and $5 cash per share proposal put forward by rivals Bain Capital and CC Capital in early March.

Any deal observer worth their salt will tell you that the market is indicating it doesn’t believe the $3.4 billion deal will get done – or at least at $5.

As a rule of thumb, non-binding bids typically trade at a 10 per cent discount to gross terms, making Insignia a clear outlier.

Why are markets reacting so strongly? Insignia’s earnings are directly correlated to market movements, so any short-term economic and market pain will flow through to its bottom line. Roughly half of its revenue is directly linked to equity markets, on and offshore, but its costs are largely fixed in the short term. News of a cybersecurity attack on its superannuation funds doesn’t help matters either.

Investors giving Insignia the once-over focus on four things in this order: the market level, outflows (in terms of its market share), its ability to cut its cost base, and then the level of charges below the line.

With equity markets having such an impact, this typically leads to wide valuation ranges for the stock. It is unclear what S&P 500 levels the bidders put in their models, but at the beginning of 2025 it was trading around 5850. Today its 5074.

Naturally, Bain and CC Capital could walk, their proposals being non-binding and indicative.

However, the counterargument goes if private equity are true believers in Insignia’s platform, see it as being instrumental to Australia’s retail retirement system and are buying it for the cost out opportunity, has anything changed, really? Markets go up, markets go down. That’s life, and maybe they can get it for cheaper down the track.

Bidding for the wealth management firm started at $4 in December before escalating to $4.30, then $4.60, by rival parties Bain, CC Capital and Brookfield. Brookfield dropped out of the race for the near 180-year-old institution formerly known as IOOF last month.