Two well-known London-based asset management boutiques have announced a tie-up as consolidation sweeps across the industry.
FTSE 250 listed Liontrust said on Tuesday it has agreed to acquire Majedie Asset Management for an initial £80m, plus an additional deferred consideration of up to £40m.
The deal, due to complete next April, will increase Liontrust’s assets under management by £5.8bn to more than £42.3bn, and boost its position in the institutional market.
Historically, Liontrust has been mainly a retail brand. It has expanded its business through acquisitions, including buying the UK investment business of Architas last year, Neptune Investment Management in 2019, and Alliance Trust Investments in 2017.
Majedie is a boutique equities manager that has previously been identified as a possible takeover target due to its smaller size and independence.
It has carved out a reputation as a strong stock picker at a time when many active managers have lost out to the rise of passive funds, and last year took over the running of the Edinburgh Investment Trust.
John Ions, chief executive of Liontrust, said in an interview: “As Liontrust has grown and expanded, we’ve been looking at other distribution channels. The acquisition of Majedie helps us propel our ambitions forward in the institutional space.”
He added that as well as taking advantage of Majedie’s position in the institutional market, the acquisition also brings new equities funds with strong track records that Liontrust can sell through its existing distribution channels.
The deal shows how active asset managers are striking mergers and acquisitions to increase scale, secure growth and tap into new markets or distribution, in an environment of declining fees, rising costs and the march of passive investing.
Last week Abrdn announced a £1.5bn deal to buy Interactive Investor, the UK’s second-largest funds supermarket, as the FTSE 100 asset manager turns to the fast-growing army of retail investors to reignite growth.
David McCann, analyst at Numis, estimated that the price Liontrust is paying for Majedie implies a multiple of 4.1 to 4.5 times management fee revenues. He added that this seemed expensive compared with multiples paid on historic Liontrust transactions that were closer to 2 to 3 times, which is “more typical in the industry for comparable businesses”.
Majedie’s fund management team will remain unchanged under chief investment officer James de Uphaugh and will continue to manage their current portfolios using the same investment process.
Majedie’s chief executive Rob Harris will join Liontrust as head of global institutional business. Shares in Liontrust rose 1 per cent to £22.90 on Tuesday morning.
Ions said that “there are enough growth engines within Liontrust to be focused on them” but did not rule out further acquisitions.
“Over the next five years the pace of change [in the asset management industry] will accelerate and winners will emerge,” he said. “The democratisation of investing means that people are becoming more engaged with their savings and an industry that has historically been opaque needs to become more transparent.”
Last week Liontrust reported a strong set of results for the six months to September 30. Adjusted profit before tax increased 93 per cent year on year to £43.1m, and net inflows increased by a fifth to £2.1bn. The group’s ESG fund range has helped it to increase both revenue and profit margins.