Standard Life has underlined its transition from insurer to asset manager by scooping up Newton's £3.6 billion private client business in a deal that more than trebles the size of Standard Life Wealth and puts it among the UK market leaders.
The deal was welcomed in Edinburgh as a strong positive for the Scottish financial sector.
SLW will pay up to £83.5 million after winning the auction announced last December by Newton, the investment manager founded in 1978 by former Edinburgh fund manager Stewart Newton but bought 20 years later by Mellon Corporation, itself bought by Bank of New York in 2007. London-based Newton manages £50bn in total, under £1bn of it from Edinburgh.
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Standard said the price would ultimately depend on the value of assets retained, as well as transferred, and the deal should enhance earnings in the first full year.
The group, under chief executive David Nish, has been emphasising its reinvention as a fee-based asset gatherer, helped by generally strong investment performance. It said: "This accelerates Standard Life's ambitions in the retail investment market, while balancing the strength of Standard Life Investments in the institutional and wholesale markets, and supporting further growth in fee-based business."
Gareth Howlett, at wealth manager Brooks Macdonald in Edinburgh, said: "It's a good thing for the Scottish fund management scene that one of our leading investment houses has taken such a positive step."
He added that despite perceptions of an "overbroked market", new players were still making approaches to firms, with a view to joining the Scottish wealth management "cluster".
Harry Morgan, at Thomas Miller Investment in Edinburgh, said: "They are two very powerful high-quality names. It will make an excellent combination."
SLW reported topping £1bn under management last year, suggesting that Newton's £3.6bn would more than quadruple its size, but Standard said the deal would probably "more than triple" assets.
Newton's private client business has about "3000 UK and international high net worth, ultra high net worth and charity clients", and strong distribution links with accountants and solicitors, SLW said.
All 79 directly employed Newton Private Clients staff will transfer to Standard Life. Caroline Tye, head of private clients at Newton, said: "We are delighted to be joining such a highly regarded discretionary investment management business."
The price was seen as being slightly below that struck in recent deals in the sector. One industry observer applauded the deal, but said: "Newton has been shedding clients at the lower end of the range, below £500,000, and we have heard they have been applying fairly stringent tests. How that fits with Standard Life's model is open to question."
He added: "You are essentially bolting on a private client manager to an investment factory, and you always have to ask whether that is for clients' benefit or because there are lots of cross-selling opportunities."