M and A

INTERVIEW: Falcon Swoops On Venerable Swiss Firm; Eyes More Industry M&A

Tom Burroughes Group Editor 5 October 2012

INTERVIEW: Falcon Swoops On Venerable Swiss Firm; Eyes More Industry M&A

One of the oldest names in banking history will be consigned to the archives when Falcon Private Bank absorbs the London-based Clariden Leu (Europe) business that it bought from Credit Suisse yesterday.

Bank Leu – which dates back to 1755 – became Clariden Leu in 2007 after merging with some of Credit Suisse’s other operations in 2007. But rather than try and integrate the firm fully into Credit Suisse, the latter bank has chosen to spin it off into the arms of Falcon, which is owned by Aabar Investments PJS, a company that is 95 per cent owned by the government of  Abu Dhabi.

The Clariden Leu brand will eventually disappear under a re-branding exercise. No final name has been chosen yet although it might be prefaced by the word “Falcon”, Eduardo Leemann, chief executive of Falcon Private Bank, told sister publication WealthBriefing in a telephone interview.

The purchase price of the deal was not disclosed. The addition of the Clariden Leu (Europe) business will increase Falcon’s assets under management to almost SFr15 billion (around $16.0 billion) from SFr12.5 billion. A study this week by Scorpio Partnership, the consultants, suggests prices for such businesses have fallen. Its 2012 Wealth Management Deal Tracker showed the valuations benchmark is now resting at 2 per cent of assets under management compared to nearly double that in 2010. There are strong indicators this will continue downward to 1.5 per cent in the next one or two years, said the report. This price changed has spurred a fuller pipeline, and M&A in wealth management has maintained pace in the past 21 months, with over $9.42 billion being spent on deals involving high net worth client funds.

The Falcon-Clariden deal prompted praise from Sebastian Dovey, managing partner at Scorpio.

“Falcon Private Bank’s CEO is steadily rebuilding the integrity of the bank following its re-emergence on the market scene after its AIG Private Bank era. The process of the build is constructive and methodical. The fact the business is now able to acquire a more sizeable asset base indicates a new level of maturity. On the other side of the deal, Graham Stapeley has been the lead architect in building a team that is tightly knit one and well regarded. It also always thrived in a more boutique environment and they are most likely going to be more comfortable in this new structure,” he said.

Dovey was referring to how the private banking arm of AIG, the embattled US insurer, had been bought by Aabar Investments PJS in April, 2009.


Asked if a management buyout had been contemplated by Clariden Leu (Europe) staff, Leemann said he was not aware of such a push. “I am sure they [Clariden Leu (Europe)] thought about it,” he said. (This publication had heard from a source that an MBO at Clariden Leu was on the cards.)

An issue for Credit Suisse might have been that if it tried to completely integrate Clariden Leu (Europe) and change the nature of the firm, a large number of managers, and client assets, could go. So it probably made more sense for Credit Suisse to find a buyer for the business, he said. As of the time of the announcement, Clariden Leu (Europe) employed 57 people.

Christopher Wheeler, an analyst at Mediobanca who looks at the wealth management sector, said Credit Suisse’s decision to offload this business was a “tidying up” exercise by a bank looking to improve profit margins and cut costs. “This is all about making the [Credit Suisse] business more cost-efficient,” he said.

After what has been a relatively quiet first half of 2012 for merger and acquisitions, activity has picked up in the wealth space. Julius Baer has bought the non-US wealth management business of Bank of America Merrill Lynch, while Deutsche Bank has sold BHF Bank.

Hard to find Mr Right

Leemann said a suitable acquisition for Falcon Private Bank had been hard to find; the firm was not interested in a business with, say, only SFr100 million of assets.

“We have always been looking to expand our business. If we grow things organically it is less risky but it can sometimes take too long to reach a decent size. We were specific that it [an acquisition] needed to be of a certain size and fit our regional approach,” he said.

Lehmann expects more industry consolidation to take place for various reasons and for Switzerland to expand its asset management industry as the traditional bank secrecy model comes under the cosh. 

“There are a lot of marginal players out there that have pieces of business they cannot properly concentrate on,” he said.

Answering the inevitable question about any impact on jobs, Lehmann said: “I don’t think there are any positions at the firm that will fall redundant; it has been a relatively lean machine,” he said of Clariden Leu (Europe). “Most people will hopefully stay,” he said.


Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes