Two well-known London-based asset management boutiques have announced a tie-up as consolidation sweeps the industry.
FTSE 250 listed Liontrust said on Tuesday that it has agreed to acquire Majedie Asset Management for £80m initially, plus an additional deferred consideration of up to £40m.
The deal, due for completion 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 grown its business through acquisitions, most recently buying Neptune Investment Management in 2019 and the UK investment business of Architas last year.
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 a statement: “Given the growing demand from institutional investors for global equity managers, we believe we can expand this client base further for the Majedie investment team, as well as take advantage of Majedie’s institutional expertise.”
The deal shows how asset managers are striking mergers and acquisitions to increase scale, look for growth and tap into new markets or distribution, in an environment of declining fees and rising costs.
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.