Morningstar believes there is still further to run with the potential takeover of Insignia Financial even with original bidder Bain Capital walking away.
Last Wednesday, it was announced by Insignia that private equity firm Bain Capital had withdrawn from the acquisition process. US firm Bain had been the first bidder to enter the fray back in December 2024 with an original bid of $4 per share, which was rejected by the Insignia board, before making three subsequent bids of $4.30, $4.60 and $5 per share.
However, it has now opted to exit the process after a 10-week due diligence period.
In an ASX statement, Insignia said: “Bain has informed Insignia Financial that it will be unable to proceed at this time with making a binding offer for the company, due to the macro uncertainty caused by the volatility in global capital markets.
“Insignia Financial remains in discussions with CC Capital, which has advised that it continues to actively work towards making a binding bid for the company over the coming weeks.
“There is no certainty that the ongoing discussions will result in any transaction being put to Insignia Financial shareholders for their consideration.”
However, as rival bidder CC Capital remains in play, Morningstar analyst Shaun Ler believes it is “still too early” to write off the acquisition process.
“We believe it’s too early to conclude that CC Capital will also withdraw, though the risk has increased. Market volatility – cited by Bain – has moderated in recent weeks. Constructive talks between the US and China to roll back tariffs have improved investor sentiment.
“While we can’t rule it out, we think it’s less likely that Bain exited due to it identifying a fatal flaw in Insignia. We see the firm’s fundamentals improving, with better profitability from cost reductions, moderating net outflows and compounding of client flows.”
As a result, it has lowered its fair value estimate from $5.00 in April to $4.45 and said Insignia should see slower fee compression, steadier fund flows and scalable cost reductions going forward.
Shares in the firm are down by 4.2 per cent since the start of 2025 and fell by 6 per cent on the day of the exit of Bain Capital.
Regarding the next possible action from CC Capital, which has also made a bid priced at $5 per share, Morningstar forecast it could possibly revise the bid lower now there is a lack of competing bidders or proceed at the current price as Insignia’s fundamentals remain solid.
There is a potential CC could also withdraw but this would likely be triggered only if equity markets or Insignia’s fund flows deteriorate significantly.
“Insignia says CC Capital is working towards a binding bid in the coming week, suggesting they are still engaged. The $5 per share big price is an attractive price for shareholders. It realises value sooner and avoids the operational challenges Insignia faces to improve.”
The research house also noted that the volatility caused by US President Donald Trump’s tariffs, as referenced by Bain Capital, presented a tough backdrop for asset management firms widely. As well as Insignia, it was also likely to affect Magellan, Platinum, GQG and Perpetual.
“The earnings impact from tariff uncertainties should be bearable this fiscal year but fully felt in fiscal 2026. As rate cuts are priced in and volatility rises, we expect business wins to slow down, with fee compression and growth investments restraining earnings growth,” Ler said.
“On average, our covered firms are likely to suffer a gradual medium-term earnings decline. This is due to fading cyclical tailwinds from rate cuts and rising volatility under the new US administration, likely suppressing flows.”
