PE firm Warburg Pincus steps in to secure £44bn Tilney Smith & Williamson merger
The £44bn merger between Tilney and Smith & Williamson is one step closer to completion under a revised transaction structure, which will see private equity firm Warburg Pincus enter the fray to co-invest in the business alongside existing investor Permira.
It follows intervention earlier this year by the Financial Conduct Authority which, in addition to disruption caused by the coronavirus pandemic, held up the merger as the regulator identified "a number of issues" with the previous terms of the deal.
In September 2019 the firms confirmed the merger, which is set to create a £44bn AUM business under the name Tilney Smith & Williamson with chief executive of Tilney Chris Woodhouse set to become group chief executive.
It is testament to the outcome that we have been striving for and the strong working relationship between all parties that we have been able to reach this agreement despite the covid-19 crisis."
Its revised transaction structure is intended to significantly reduce external debt for the combined Tilney Smith & Williamson group, lower ongoing financing costs and improve its regulatory capital position.
Under the new terms of agreement, AGF, Smith & Williamson's largest shareholder, will now fully exit its investment in the group upon completion of the transaction, with the overall transaction value for individual Smith & Williamson shareholders the same as under the original agreement.
Smith & Williamson's management will be rolling the majority of their investment into the equity of the combined group.
Subject to regulatory and anti-trust consent, and the approval of Smith & Williamson's shareholders, the merger is expected to compete in the second half of 2020.
The new investment by Warburg Pincus, which is the sixth investment the PE firm has made in a wealth management company, is "a significant vote of confidence in the strength of a combination of Tilney and Smith & Williamson and adds further credibility to the firm's longer term strategy", according to the firms.
Tilney Smith & Williamson, which is set to become the fourth largest UK wealth management business by assets and the sixth largest UK professional services firm by income, is expected to generate £530 million of revenue on a pro forma basis.
Both Tilney and Smith & Williamson noted in a statement that they have seen minimal business disruption during the ongoing crisis, with client engagement high and net flows increasing in the first half of 2020 compared to the same time last year.
Co-chief executives of Smith & Williamson David Cobb and Kevin Stopps said: "The rationale for merging Smith & Williamson with Tilney has been persuasive from the outset, given the complementary strengths of the two businesses and the benefits of scale the combination will bring.
"The revised structure retains both these strategic benefits, as well as value for our shareholders, and delivers a more robust financial structure and a strong additional partner for the future in Warburg Pincus.
"It is testament to the outcome that we have been striving for and the strong working relationship between all parties that we have been able to reach this agreement despite the covid-19 crisis. We are confident the combination will be even better placed to meet the new challenges and opportunities that will arise in the future."
Woodhouse (pictured) added: "This transformational deal brings together two highly complementary and successful businesses, with shared values of focusing on our clients and high standards of professionalism.
"Together, Tilney Smith & Williamson will be uniquely well placed to support clients with both their personal financial affairs and business interests.
"The compelling rationale has been further validated by Warburg Pincus making a significant investment in the business against the backdrop of a major global health crisis and related challenges in the economic environment."
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