Close Asset Management, part of the UK financial services group Close Brothers, is set to acquire Cavanagh, ending speculation that Rathbones was about to buy the eight-office IFA firm.

Close’s cash offer for the firm is 220 pence for each Cavanagh share and values the entire issued and yet-to-be issued share capital of Cavanagh at approximately £26.2 million ($42.2 million), net of expected share option proceeds, which equates to approximately 1.7 per cent of Cavanagh's revenue-generating client assets, the firm said in a statement.

Rumours that Rathbones was likely to buy Cavanagh emerged in February when the latter announced that it was in takeover talks with an unidentified potential buyer. Belief that Rathbones was the mystery potential suitor appear to have been based on the fact that the two firms already had a close relationship, Cavanagh having outsourced its discretionary investment management to Rathbones a few years ago.

The proposed transaction is not expected to have a material impact on Close Brothers' earnings in the 2011 or 2012 financial years, the release continued.

Close’s acquisition of Cavanagh – which has 60 advisors – closely follows its purchase of Allenbridge Group in February of this year of Bristol-based IFA Chartwell Group in September 2010. Close has been prominent in taking advantage of the current round of consolidation in the industry following the turmoil of the financial crisis a couple of years ago. A number of factors are prompting IFAs to merge with larger players, such as increased regulatory costs forcing them to seek economies of scale.