INVESTMENT manager Rathbone Brothers has highlighted the benefits of the recent £104 million acquisition of Glasgow-based Speirs & Jeffrey amid challenging times for the sector.
The acquisition completed in August and resulted in a significant increase in Rathbones’ presence in Scotland.
It appeared to value the holdings of stockbroker brothers Graham and Andrew Waddell, whose grandfather Herbert founded Speirs & Jeffrey in 1906, at around £35m in total.
The deal followed a long search for a suitable acquisition target by London-listed Rathbones as the firm looked to boost its growth rate.
Announcing a 14 per cent increase in third quarter profits yesterday, Rathbones said the acquisition had put the company in a better position to cope with the pressures resulting from volatile market conditions.
The £6.7 billion funds that came with Speirs & Jeffrey accounted for the vast bulk of the increase in assets under management at Rathbones in the quarter, to £47.3bn at September 30 from £39.9bn at June 30.
Funds under management grew by 18.5 per cent in the quarter including the Speirs & Jeffrey assets and by 1.8% without them.
“This increase in scale places us in a strong position to continue to improve our service to clients and, mindful of recent volatility in investment markets, to maintain our disciplined investment in the business,” said Rathbones’ chief executive Philip Howell.
Noting that inflows of unit trust business fell to £121 million net of withdawals in the quarter, from £342m in the same period of last year, Rathbones said the decline reflected “a more difficult trading environment for asset management generally”.
Big movements in stock markets have created complications for investors, amid the uncertainty about how factors such as Brexit and trade wars will impact on the global economy and corporate earnings.
The FTSE 100 has ranged between 6,866.94 and 7,903.5 in the last year. The index opened at 7059.4 yesterday.
Rathbones faced competition to buy Speirs & Jeffrey at a time when pressure on fees, regulatory changes and the costs involved in keeping information technology systems up to date are encouraging consolidation in the wealth management sector.
At the time of the deal, Rathbones’ Mr Howell said Speirs & Jeffrey was an ideal fit noting the firms had similar client bases.
Rathbones said it could achieve “meaningful” revenue synergies by leveraging its brand and aligning Speirs & Jeffrey’s proposition with that of the buyer. The company also expected to achieve cost synergies of around £6m annually within three years.
It is understood integration work is going to plan and is expected to be completed by June 2019. Speirs & Jeffrey will trade as Rathbones from that month.
Speirs & Jeffrey chief executive Russell Crichton has become head of Rathbones’ Scottish business.
Rathbones grew underlying net operating income to £80.3m in the three months ended September 30, from £70.5m in the same period last time.
It paid an initial £104m cash and shares for Speirs & Jeffrey. A further 5.8m shares may be payable dependent on the achievement of synergies.
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