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IOOF beds down acquisitions as sector heats up

Diversified financial services firm IOOF Holdings (ASX: IFL) has reported underlying earnings of approximately $51 million, an increase of 5% on the prior year. These results include contributions from the recently acquired DKN Financial and Plan B financial planning businesses. Management also provided guidance on the expected synergies from the Plan B acquisition, which is forecast to reach $10 million per annum.

Recently there have been a number of market commentators suggesting the mid-tier financial services space is ripe for further consolidation. Given the level of synergies that can be extracted from consolidation, for example IOOF’s Plan B acquisition, and the general rise in levels of funds under management (FUM), it wouldn’t be at all surprising to see more merger and acquisition (M&A) activity.

Just last week Equity Trustees (ASX: EQT) made a play for Trust Company (ASX: TRU) with an all-script offer which valued Trust Company at $5.28 per share, based on closing prices pre-announcement. Meanwhile, WHK Group (ASX: WHG) has released its interim results, and taken the opportunity to update the market on the approach from SFG Australia (ASX: SFW) in relation to a potential merger. As SFG highlights in its market release, management believes that significant opportunities to capture synergies and unlock value for shareholders are possible through a merger of the two companies.

With the financial services sector enjoying a resurgence, Treasury Group (ASX: TRG) and Perpetual (ASX: PPT) are two names that have in recent times been mentioned as both potential acquirers or acquires.

Foolish takeaway

The financial services sector is home to a number of quality companies with strong balance sheets and maintainable dividends. There is also the potential for shareholders to benefit from synergies through acquiring a competitor or receiving a takeover premium for their stock should a suitor come along.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Tim McArthur owns shares in Perpetual Limited and Treasury Group.

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