German giant puts down UK private banking route

The recent M&A deals for corporate finance adviser Hawkpoint and private client firm Tilney Investment Management herald a new round of activity in the UK private banking marketplace. While the former is a merger of interests between Hawkpoint and Collins Stewart PLC that could provide interesting new opportunities for high-net-worths (HNWs), the latter is an even more interesting case study in MBO success following Deutsche Bank’s swoop on a business that just two years ago traded hands from Refco to management. Deutsche Bank is reputed to have paid up to £350m (e517.5m) for Tilney, the Liverpool-based business which currently manages over £6.7bn for over 15,000 clients. The 330-person company was widely viewed as the silent giant in UK onshore private banking and when it traded hands in an MBO backed by private equity shop Bridgepoint in 2005, many thought it was a smart trade that would significantly rise in value and performance free from the Refco ownership ties. At the time of the 2005 MBO, it was widely viewed that the business would spend at least five years in private ownership before reaching for outside suitors. However, the deal price reputedly put on the table by Deutsche was clearly an option too good to be missed, particularly for Bridgepoint after less than two-years of ownership. Meanwhile, Deutsche, which has effectively had a minimal HNW footprint in the UK, will now seek to power ahead in the market in a similar fashion to UBS Wealth Management following its deal with Laing & Cruickshank. Effectively, Tilney Investment Management will be the foundation of Deutsche’s private client UK business and while the mix of HNW assets is much more scattered than Deutsche would have liked, the opportunity for building a substantial market share is clear. In many ways, Deutsche’s successful bid was a surprise as the bank has shown little commitment to the UK market to date. No doubt there were several other market suitors for Tilney and Deutsche was the lucky victor in a bidding war game of corporate “pass the parcel”. To others, perhaps the price was just too high. The Collins Stewart-Hawkpoint deal may not at face value look like a pure private banking event. Collins Stewart Group, which is demerging from the Collins Stewart Tullet, will assume control of Hawkpoint for a consideration of £40m. However, The Collins Stewart demerger in effect means the new entity will concentrate on private client brokerage business and will also have full ownership of one of the leading corporate finance advisory businesses in the market. Moreover, in the past decade Hawkpoint has built an impressive reputation supporting private client businesses in acquisitions and disposals. Under the future terms of business, Hawkpoint will remain a separate business entity to Collins Stewart. However, it is very possible that the two may work more closely on benefiting each others’ businesses. In the case of Collins Stewart it is apparent the firm will need to bulk up its private client business. Having the services of Hawkpoint in-house will be significant in searching for opportunities. In this context, the questions are now clearly who will be next and at what multiple? The decision by Morgan Stanley to put Quilter, with £5.7bn in AUM and 300 staff, on the block is the first offering. However, openly marketing a business for sale in wealth management circles has never enjoyed great success. Indeed, the best prizes and prices are usually for firms that few thought were up for grabs. The sweetspot businesses appear to be those with between £5bn-£10bn in assets under management. This could put UK traditional houses Charles Stanley, Rathbones and Rensburg Sheppards under the spotlight. Old favourites Gerrard and Killik may also join Quilter on the sales alter for similar reasons. Sebastian Dovey is managing partner at wealth management strategy think-tank, Scorpio Partnership