FEARS about what the takeover of Scottish businesses by investment firms will mean for Scotland heightened last week even as Rishi Sunak left generous tax breaks for wealthy financiers in place.
Edinburgh-based fintech star Nucleus Financial published the terms of a £145 million takeover it is set to agree, which has provoked “significant anxiety” among employees about what it will mean.
The proposed takeover of Nucleus underlines the scale of what the business has achieved as a pioneer in the emerging financial technology industry.
Nucleus provides online platforms that investors can use to manage their portfolios. Demand for platforms is booming as people are required to take more responsibility for saving for retirement.
Nucleus has around £18 billion assets under administration and employs about 400 people, including over 100 in Glasgow.
The 188p per share offer by a rival platform business, James Hay, is pitched at a big premium to the price the shares fetched before a range of firms expressed interest in December in bidding for Nucleus.
James Hay, which is backed by the Epiris private equity business, won the day.
READ MORE: New owner underlines value of venerable Standard Life brand sold by Scottish giant
In an appendix to the document detailing the terms of the takeover published last week, it was noted that Nucleus staff could see the commercial sense in combining the firm with James Hay.
However, a People Representative Group convened by Nucleus in accordance with regulations said the plans outlined by James Hay rang very loud alarm bells.These concern James Hay’s proposal to rationalise the combined central functions, which is likely to result in redundancies, and to have FNZ take over responsibility for the provision of the platform technology the enlarged group will use. Around 230 of the 400 staff at Nucleus will transfer to FNZ, which has offices in Edinburgh.
The PRG reported: “There is significant anxiety within the staff body regarding both the move to FNZ and the review of the central and HQ functions”.
The takeover document includes reassuring statements about how much value James Hay places on the skills and experience offered by Nucleus staff and the fact it does not plan to close any offices. While James Hay has offices in Salisbury, the document states the company will have no single headquarters.
But emollient words may not do much to settle the nerves of worriers.
The loss of listed companies does more than bruise the national ego. As well as triggering job losses at the firms concerned, takeovers can deprive Scotland of a valuable source of work for the key professional services sector.
READ MORE: Glasgow power heavyweight agrees £2.3bn sale after years of shares decline
Glasgow temporary power giant Aggreko’s directors last week recommended a £2.3bn takeover bid by the London-based TDR Capital and America’s I Squared Capital private equity firms. The Nucleus case further underlines just how much influence investors based outside Scotland can have on the country’s firms.
The offer document indicates the sale process has been driven by South African financial services group Sanlam, which has a controlling 52% shareholding in Nucleus.
Sanlam provided early support for Nucleus, for which it is set to be well-rewarded.
The enlarged James Hay/Nucleus may have no single headquarters but the business will be driven from London. This is home to the Epiris private equity business, which acquired a controlling stake in James Hay in 2019, to use the business as a consolidator in the platform space.
Some will worry that Epiris will follow what is seen as the standard private equity playbook. This involves private equity funds buying up firms then squeezing out synergies to support growth in short-term earnings and allow them to exit their investments in four or five years. The implications for jobs can be grim.
With interest rates at record lows, private equity firms can use cheap debt to fund big dividend payouts by the businesses they buy.
Rishi Sunak had a chance to address anomalies in the tax system that privilege private equity investors in The Budget.
The former hedge fund executive could have scrapped the generous treatment of the gains made by staff of private equity houses on their investments, under the carried interest system.
He could also have limited the tax relief available on debt interest.
He did neither.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel