This week’s purchase of UK’s Eden Financial by Canada-headquartered Canaccord, boosting its Collins Stewart arm, is another stage in Canaccord’s push into the European wealth market.

This week’s £12.8 million (around $20.7 million) purchase of UK’s Eden Financial by Canada-headquartered Canaccord is another stage in the latter firm’s push into the European wealth management market. There may be more deals, a senior executive says.

Canaccord, which in March bought Collins Stewart Hawkpoint and hence acquired the latter’s Collins Stewart Wealth Management business, has this week boosted CSWM further by adding £835 million of assets by acquiring Eden.

“Canaccord ultimately has further ambitions to grow its UK/ Europe wealth management platform. However, the current focus will now be on successfully integrating the Eden business into CSWM,” Neil Darke, chief executive of Collins Stewart Wealth Management, told this publication in an interview.

“CSWM has been pursuing a strategy laid out four or five years ago when I took it over, to double its assets to £10 billion in assets under management by the end of 2012 through organic and inorganic growth. This latest [Eden] deal will take us to around £9 billion,” said Darke.

“CSWM has known the management of Eden Financial for some time; this is not two strangers meeting at a bar,” he said. "There is good chemistry and we believe a good cultural fit between the two businesses. In due course, we would like to move Eden’s clients assets onto our in-house administrative and custody platform. They [Eden] currently use an external third-party platform,” he continued.

Acquisition

In the acquisition, Canaccord will pay a consideration of up to £12.8 million in cash, of which £7.68 million will be payable upon completion and up to £5.12 million after 12 months, subject to revenue retention and revenue mix thresholds. The acquisition is subject to approval by the UK’s Financial Services Authority.

The move may also be a sign of how some firms are trying to increase their market footprint and win economies of scale as regulations and low interest rates bite into margins. In probably the biggest deal of the year, Julius Baer, the Swiss private bank, has purchased the non-US wealth arm of Bank of America Merrill Lynch. Deutsche Bank has agreed to sell its private bank unit BHF Bank to financial services group RHJ International (owner of Kleinwort Benson Group).

Darke is convinced that the UK’s relatively fractured wealth and asset management market will see more consolidation.

“We would continue to expect further [industry] consolidation. The UK wealth management industry remains very fragmented,” Darke added.

Recent deal flow does not suggest a big increase in M&A activity among wealth managers, however. The first two quarters of the year saw 57 merger and acquisition deals in the asset management sector, with deal volume holding exactly steady compared to the first half of 2011, according to Freeman & Co. (That report was carried out prior to completion of the Julius Baer/Merrill transaction.)

Happy marriages

As with any such agreements, the devil is in the detail and not all mergers have led to happy marriages or added to overall company value over the long run.

“Part of the attraction to Eden was access to the broader and deeper investment capability of CSWM,” Darke said. “As a result of the deal, no client-facing roles at Eden will be affected. However, there may be an impact on the middle- and back-office functions as the business is integrated into CSWM," he said.

“Our experience of integrating businesses of this nature is that it is imperative that the physical integration takes place as quickly as is practicable.” 

Darke pointed out that Eden is, as part of separate discussions, in advanced talks to dispose of its small, fledgling asset management business.