UK financial planning firm Tilney and financial services group Smith & Williamson have agreed a revised transaction structure for their proposed merger.
The merged group will be known as Tilney Smith & Williamson and will be an integrated wealth management and professional services business.
The duo said that the revised transaction structure will result in a “significant reduction in external debt for the combined group, lower ongoing financing costs and an improved regulatory capital position”.
This comes after the Financial Conduct Authority raised a number of issues with the proposed transaction as it was originally structured, and valuation difficulties due to a drop in the dollar caused the deal to nearly collapse.
Investment
As part of the revised transaction, global private equity firm Warburg Pincus will co-invest in the combined business alongside funds advised by fellow investment firm Permira.
Reports state that Warburg Pincus will be investing £250m ($310m, €279m) to help complete the deal.
Tilney Smith & Williamson will be Warburg Pincus’ sixth investment in a wealth management company.
Smith & Williamson’s largest shareholder, Canadian asset manager AGF, will now fully exit its investment in the group upon completion of the deal.
Finances
The overall transaction value for individual Smith & Williamson shareholders will be the same as under the original agreement.
As before, Smith & Williamson’s management will be rolling the majority of their investment into the equity of the combined group.
The combined business will be responsible for approximately £44bn in assets under management and will generate around £530m of revenue.
Ranked by assets under management, Tilney Smith & Williamson is expected to be the fourth largest UK wealth management business and, measured by fee income, will be the sixth largest UK professional services firm.
It is expected that completion of the deal will take place in the second half of 2020.
Retains strategic benefits
“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,” said David Cobb and Kevin Stopps, co-chief executives of Smith & Williamson.
“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 crisis.”
Chris Woodhouse, chief executive of Tilney, added: “Together, Tilney Smith & Williamson will be uniquely well placed to support clients with both their personal financial affairs and business interests.
“Integration planning is well advanced and we look forward to progressing the deal through to completion in the coming months.”
