Wealth management transactions step up

After several patchy years for wealth management deal flow, is now the time to bring private client businesses to market? Rumours of the accelerated potential for M&A activity in the wealth and asset management sector have not been exaggerated and the sweet spot for deal opportunities is in the region of £5bn (E7.3bn) to £15bn of assets under management.

The business models of these firms inhabit a twilight world—too small to be big and too big to be small. One recent example in the UK—a microcosm for transactions occurring on the Continent—is the £188m reverse offer by one private client investment manager, Rensburg, for another, Carr Sheppards Crosthwaite (CSC). CSC has £10.3 bn under management. Another has been the recent MBO of Tilney Investment Management, with £5bn under management. Meanwhile, there is the pending auction for the UK-based asset management business of Deutsche Bank. An undeclared slug of this business is private client funds.

Direct beneficiaries of this activity are the – currently – limited number of boutique corporate finance advisors working on the deals. One of the most ubiquitous so far this year has been independent corporate finance adviser Hawkpoint, which had a brief involvement in the CSC deal while acting for Rathbone Brothers on a counter-bid, and which is rumoured to acting for Deutsche Bank. This latter deal is expected to be worth some £400m to £800m. Another active advisor is Livingstone Guarantee, which acted for Refco in the MBO of Tilney Investment Management. A third is Ray Soudah’s Swiss-based Millenium Associates which has now acted for Barclays Bank in the French acquisition of ING Securities Bank.

There is little doubt that corporate buyers and financial investors, as well as their M&A advisors, will steadily turn their attention to the busy wealth management sector. These deal hunters are sensing that the choppy nature of the market is now throwing up more opportunities than ever and a rebalancing of the global wealth management landscape is underway. Furthermore, the fragmented nature of the wealth management market provides ample opportunities for existing players to grow and for financial buyers to create value. In this context, the advisors sense a killing opportunity, or more pertinently, an opportunity to make a killing.

As mentioned, the opportunities in the next 12 to 18 months are not confined to the UK. Recent deals in Europe include UBS snapping up Sauerborn Trust in Germany, ABN AMRO nabbing Bank Corluy in Belgium, Barclays’ French deal for ING Securities Bank, KBL European Private Bankers purchasing Bank Puilaetco in Belgium, and Banco Santander grabbing Bankia Bank. The financial details for Bank Corluy, Bank Puilaetco and Bankia Bank were not available. And there are plenty of future deals and opportunities that could be on the table, according to our analysis of the market, which means that wealth management could become an M&A buffet.

Ted Wilson is a consultant at wealth management strategy think-tank Scorpio Partnership

‘The fragmented nature of the wealth management market provides ample opportunities for existing players to grow’