Anthony Wamsteker, Praemium CEO.

After selling its international business to Morningstar, Praemium is still open to a merger or acquisition of its Australian business – for the right price – as the industry continues to fight for the benefits of scale.

Last year, the investment platform announced it would offload its international business which covered the UK, Hong Kong, Dubai and Jersey, with Morningstar making an offer at the very end of 2021.

Consolidation in the industry had been well underway as Praemium acquired Powerwrap in 2020, as well as OneVue being acquired by Iress.

Anthony Wamsteker, Praemium chief executive, says the firm does not dispute there was opportunities for consolidation to create greater scale.

“You just need a lot of scale to make your platform business work – and even large companies like Netwealth and with all the growth we’ve had in Australia – we do feel that more scale is helpful,” Wamsteker tells Professional Planner.

“When you have to invest so much into technology to develop a product that’s acceptable to your clients and competitive with other alternatives, you have to have a certain market share to be able to keep investing in your platform.”

For this reason, he continues, platforms need to keep growing market share and consolidation through mergers and acquisition is most likely the end result.

“If somebody has more market share than you then they’ve got more revenue than you and more to spend on their systems.

“You have to keep growing your market share; some of that comes through organic growth but we haven’t ruled out a merger might work for our shareholders, but it has to be at the right price,” he continues.

“I don’t think it’s clear cut yet whether the three major independents – ourselves, HUB24 and Netwealth – whether we’ll get there organically or we’ll need a merger and acquisition.”

Last November, Netwealth made an unsolicited offer to acquire Praemium which was rebuffed.

“We understand the argument that you should get more scale and one way of doing that is put some businesses together… we just felt the price wasn’t at a level that would make it attractive for our shareholders,” Wamsteker says.

Morningstar acquisition adds legitimacy 

The decision to sell the international business was so the firm could focus solely on the Australian market, but Wamsteker felt being chosen for acquisition by Morningstar added a level of credibility for the Australian business.