The boards of Tilney and Smith & Williamson have officially announced an agreement to combine their businesses, creating one of the UK’s largest integrated wealth management and professional services groups.
The combined business will be called Tilney Smith & Williamson, and will have a combined £45bn worth of assets under its management. The transaction is expected to be completed in early 2020, pending regulatory approvals.
Chris Woodhouse, Chief Executive of Tilney, said: “The merger of Tilney and Smith & Williamson represents a compelling combination and together we will look to build on the considerable and complementary strengths of both firms.
“Like Tilney, Smith & Williamson has an excellent reputation for looking after its clients over many years and we recognise the value its culture and expertise will bring to the combined group.”
David Cobb and Kevin Stopps, Co-Chief Executives of Smith & Williamson, said: “We are delighted to be merging with Tilney, a business that we believe is an excellent partner for Smith & Williamson.
“The enlarged group will be a leading wealth management and professional services business, benefiting clients and colleagues in both companies.”
The merger is the latest sign that regulatory pressure is forcing the industry to consolidate, with wealth managers across Europe adjusting to tougher regulation that stems from the EU’s new Mifid II market rules. Introduced last year, the rules raised requirements on reporting and communicating with clients.
When the purported merger was first announced in August, an industry executive was quoted in the Financial Times as saying that such a merger would signal the death of the old-school stockbroker as firms prioritise scale and process over client relationships.
He said: “Compliance is driving this. Scale is absolutely essential. The cost of compliance is becoming an administrative cost.
“Most people want one organisation that can solve all of their various financial needs, so being able to tie that together is very compelling.”
In their statement on the merge, Mr Cobb and Mr Stopps said the opposite, believing that this would enhance client relationships, saying: “The investment management and professional services market is changing rapidly, with the evolution of client needs accelerating.
“The combination of our two businesses creates real scale, broader capabilities and complementary service offerings, enabling the merged group to enhance existing client relationships and win a higher share of new business opportunities.”
The transaction values the combined business at £1.8bn and Tilney Smith & Williamson’s will have combined revenues of around £500m, and earnings before tax of £150m.
Smith & Williamson shareholders will receive consideration valued at £625m, which will be satisfied through a combination of cash consideration and shares in the combined group. Shareholders will be rolling much of their investment into the equity of the merged firm.
The board will comprise of representatives from both firms. The chairman of the merged business will be Will Samuel, and Mr Woodhouse will be the Group’s Chief Executive, while Mr Cobb and Mr Stopps will join the board once the merger is complete.
In a joint statement from the firms, both boards said that they felt the merger would ‘deliver long-term benefits for clients, employees and investors’, and create a unique client proposition that covers professional services, financial planning and investment management.
The firm will have an office network across 36 towns and cities in the UK, Ireland and the Channel Irelands, and will have approximately 280 investment managers, 260 financial planners and a professional services business with around 150 partners and directors.
The new up-scaled operation means the boards believe they can offer a personalised service to its clients, while enhancing its investment in technology to meet the needs of clients in the modern era.