WEALTH manager Tilney appears confident of completing its merger with professional services group Smith & Williamson after a private equity giant agreed to invest around £250 million which will help the enlarged business cut debts.

The companies said Warburg Pincus would take a stake in the enlarged business as part of a revised transaction.

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The Financial Conduct Authority had expressed concerns about the structure of the original deal, which was agreed in September.

Tilney and Smith & Williamson said the revised structure would result in a significant reduction in external debt for the combined group, lower ongoing financing costs and an improved regulatory capital position.

The Tilney Smith & Williamson group will have a significant presence in Scotland, with around 370 employees in the country.

Tilney has three offices in Scotland. Smith & Williamson has headquarters in London but was founded in Glasgow in 1881. The firm retains an office in the city. It provides services such as investment management for clients and operates one of the UK’s biggest chartered accountancy businesses.

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The companies said the enlarged group will be the UK’s leading integrated wealth management and professional services business, with around £44 billion under management.

They added: “The new investment by Warburg Pincus, particularly in the midst of a global health and economic crisis, represents a significant vote of confidence in the strength of a combination of Tilney and Smith & Williamson.”

Both have recorded increased inflows of funds net of withdrawals this year.

The amount Warburg Pincus will invest was not disclosed but is understood to be around £250m.

The revised deal will pave the way for payouts worth around £175m to Canadian investment business AGF Management, Smith & Williamson’s biggest shareholder.

The companies said AGF would exit its investment as part of the revised deal.

“The overall transaction value for individual Smith & Williamson shareholders will be the same as under the original agreement,” they noted.

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When the original deal was struck in September the companies said Smith & Williamson shareholders would receive consideration valued at £625 million, including shares in the enlarged business.

They said then the transaction valued the combined business at around £1.8 billion.

In January AGF announced that the Financial Conduct Authority had informed Tilney Group that the proposed transaction structure for the deal had not met with its approval.

It said of the amended deal yesterday: “The extraordinary circumstances created by the Covid-19 pandemic and the resulting economic and valuation impacts are addressed by the revised terms and we believe the structure will meet the points raised by the regulators.”

Tilney is backed by private equity group Permira, which will retain a stake in the enlarged business.

It is expected the revised deal will complete in the second half of 2020.