Old Mutual Wealth, part of UK-listed Old Mutual, has agreed to buy Quilter Cheviot for £585 million ($940 million) from its private equity owner Bridgepoint.

Old Mutual Wealth, part of UK-listed Old Mutual, has agreed to buy Quilter Cheviot for £585 million ($940 million) from its private equity owner Bridgepoint, completing yet another change of ownership for the affected businesses in what has been a busy period in wealth management mergers and acquisitions.

The deal, bringing over £16 billion of Quilter Cheviot AuM to Old Mutual Wealth, was hailed by the latter firm as a way to more effectively penetrate a client base among affluent and high net worth clients, reflecting a sense that such individuals are seen as the most profitable in today’s increasingly costly regulatory environment. As at the end of June, Old Mutual Wealth oversaw £80.3 billion in customer investments.

Quilter has been through a range of owners. At the end of 2011, it was acquired in a primary buyout from Morgan Stanley Smith Barney by Bridgepoint; it then merged in late 2012 with Cheviot Asset Management. The latter firm had itself been created by a team of former UBS wealth managers in 2006.

Today’s announcement – about which there had been some media speculation in recent days and weeks – further underscores how the UK wealth management market, facing rising costs and pressures to achieve scale in some markets, is seeing a measure of consolidation. The transaction may also highlight some concerns about whether private equity houses are ideal long-term business owners of such firms or more likely to be relatively short-term players looking to profit from what they see as turnaround situations.

“The acquisition of Quilter Cheviot completes the proposition with the addition of a discretionary investment management service, enabling Old Mutual Wealth to meet the needs of the growing number of affluent and high net worth investors.  Customers investing via the current Old Mutual Wealth platform typically hold between £50,000 and £250,000, whereas the average investment via Quilter Cheviot’s bespoke discretionary investment service is in the region of £500,000,” Old Mutual Wealth said in its statement today.

“Adding Quilter Cheviot’s discretionary investment service to Old Mutual Wealth’s existing range of managed investment solutions enables Old Mutual Wealth to maximise its participation in the growing trend post-RDR of financial advisors outsourcing investment solutions,” the firm continued.

Following approval from regulators, Quilter Cheviot will become the discretionary investment management business within Old Mutual Wealth.  Martin Baines, chief executive of Quilter Cheviot, will remain in his role and will join the Old Mutual Wealth executive committee, reporting to Paul Feeney, chief executive of Old Mutual Wealth, the statement said.

“Discretionary investment management was a clear gap in our proposition and the addition of Quilter Cheviot closes that gap.  This acquisition is a major step towards our vision of becoming the UK’s leading investment business, with a proposition we can export to our international markets over time,” Feeney said.

Bridgepoint exit
Commenting on the exit, Bridgepoint partner Michael Black, said: “The step change in scale that we and management achieved over the last three years has more than doubled profitability and assets under management and generated significant inflows of new business.”

“The power of the combined Quilter Cheviot platform is well set to continue to outperform the fast growing UK wealth management market. Old Mutual’s strategic commitment to the wealth space and the power of its vertically-integrated model will provide an excellent home from which it can continue to grow,” he concluded.

Advisors involved in this transaction included: For Bridgepoint – Evercore (corporate finance), Linklaters (legal); for management: Shearman & Sterling (legal).