Brooks Macdonald has bought independent financial advisor LIFT in a deal worth up to £45m, as takeover rumours swirl around the group.
LIFT has £1.6bn in assets under advice, with £600m of this being funds under management. The firm is headquartered in Greater Manchester, with offices in London and Edinburgh, and has around 1,400 clients, made up of finance workers and professional sportspeople.
Last year, the company brought in £11.3m in revenue, with an operating profit of £2.5m and profit before tax of £500,000.
Brooks Macdonald bought LIFT for an initial consideration of £30m cash, and a total consideration of up to £45m, subject to financial targets.
The buyout was made following the sale of Brooks Macdonald’s international arm last month in a deal worth up to £50.9m, as it sought to simplify its business offering and “reignite growth”.
“It makes sense to assess the transaction in combination with the exit from International, where Brooks Macdonald looks to have improved business mix and growth prospects, but there will be a gap in terms of profitability in the short/medium term,” said RBC analysts Ben Bathurst and Jude Neanor.
Panmure Liberum’s analysts agreed, describing the LIFT purchase as fitting neatly with the firm’s refocus on the UK, as well as enhancing its position within financial advice, “which we believe to be a key strength within the industry”.
“Ultimately, the success of the change in business portfolio will likely hinge on the ability to realise revenue synergies from the conversion of LIFT clients to the Brooks Macdonald investment proposition (though no details have been shared in this respect) and for LIFT to benefit organic growth prospects for Brooks Macdonald,” added the RBC analysts.
Rumours have circulated for months that Brooks Macdonald may be a target in a takeover attempt by a larger competitor, as the wealth management industry continues to experience greater consolidation.
Last year, Reuters reported that the company was working with investment bank Raymond James as a defence against a takeover bid.
“The group’s digestible market cap and strong managed portfolio service proposition mean we think it could be an M&A target for an asset manager looking to improve exposure to UK wealth,” explained Bathurst and Neanor.
The company currently matches the value of other wealth managers, trading in line with the average price to earnings ratio of 11.8 times. Its share price jumped 3.2 per cent on the news this morning.
“We are tremendously proud of the business we have built over the last 17 years, and as part of Brooks Macdonald we will be able to bring a new level of sophistication to our investment proposition, as well as much better opportunities for our people as part of a larger business,” said Michael Holden and Joel Adams, founders of LIFT.
“We look forward to joining the Group and are excited about the future of our business as we leverage the opportunities this transaction will create for everyone involved.”