UK Wealth Manager Bulks Up With Channel Islands Acquisitions

Tom Burroughes

16 November 2012

London-listed wealth and investment management firm, Brooks Macdonald, said today it has agreed to buy Spearpoint Limited and Spearpoint Retirement Services Limited, Jersey- and Guernsey-based discretionary fund management firms.

Brooks Macdonald will initially pay around £23.1 million (around $36.7 million) in a mixture of cash and equity; there will also be payment of a deferred consideration, in cash in November 2014. If the value of Spearpoint’s discretionary funds under management were to remain at around current levels, the payment will be about £4 million.

However, based on growth projections for Spearpoint’s discretionary funds under management over the period to November 2014, Brooks Macdonald expects to pay an additional approximate £5 million of deferred consideration over and above the £4 million figure, it said in a statement.

The deal comes shortly after the UK wealth management market saw the merger of UK-based Quilter and Cheviot Asset Management, while a few weeks ago, Switzerland-based Falcon Private Bank bought the London-based Clariden Leu business from Credit Suisse. Recent events, analysts say, suggest there will be a continued flurry of M&A activity among mid-tier and smaller wealth houses to obtain economies of scale in a tight-margin environment.

The Brooks Macdonald deal is expected to be completed on 19 November.

A spokesperson for Brooks Macdonald said there will be no redundancies as a result of the deal - the firm has no offices at present in the Channel Islands so there is no duplication of roles. At present, Spearpoint employs 54 staff, while Brooks Macdonald has 282 (as at June 2012).

“Spearpoint is one of the leading integrated wealth management businesses in the Channel Islands with funds and assets under management of approximately £1.1 billion,” Brooks Macdonald said. The combined Spearpoint group in Jersey and Guernsey has around £4.5 billion of assets, excluding advisory, property and third-party administration assets.

To finance the acquisition, Brooks Macdonald proposes to raise £21.5 million via a vendor placing of 1,869,566 new ordinary shares at the placing price of 1,150 pence per share. The net proceeds of the placing will be used to pay part of the initial consideration.

Brooks Macdonald said the acquisition should immediately boost its earnings; Spearpoint reported pre tax profits of £3.91 million on revenues of £11.42 million for the year ended 31 December 2011.

“The acquisition of Spearpoint is a major step forward for the Group and captures an opportunity we have been seeking for a number of years. It adds scale, offshore and international capability together with the acquisition of a strong investment management and pensions team,” Chris Macdonald, chief executive for Brooks Macdonald, said.