Why the merger of Premier and Miton is happening

Why the merger of Premier and Miton is happening

Distribution was the driving factor behind the merger of mid-tier UK fund management companies Premier and Miton.

The merger, which was announced yesterday, will see the combined company reach assets under management of £11.5bn.

Mark Harper, head of marketing at Miton Group, said the merger offered an opportunity for "the benefits of greater scale to take place, and for more investment in areas such as distribution".

He said Miton had focused its sales efforts on larger, London-based, fund buyers while Premier had focused on distributing products to financial advisers across the UK where Miton is less strong.

This, he said, would give the combined company plenty of opportunities to grow.

Mr Harper said: "Both companies are profitable on their own and could have continued to grow as separate businesses, but what this does is speed up that growth.

"I think some other asset management mergers have been driven solely by a desire to achieve cost savings, but because there is very little overlap between the product ranges of both companies, this is about more than that, the cultures of the two businesses are aligned and can benefit from greater scale."

Premier chief executive Mike O'Shea, who will lead the new company, said the merger will allow for more cross selling of the companies' products to each others' clients.

He said: "Miton’s distribution team is very good and has focused on the wealth managers and big fund buyers. Premier’s sales team is very good, and complements Miton’s very well. The aim will be to cross sell to each others' clients. There will also be scope to invest more in technology and into recruiting and retaining fund managers."

The approach to recruiting managers will be "bottom up", driven by the availability of suitable managers rather than launching a fund in a certain area and then finding a manager for it.

Miton is an Alternative Investment Market listed fund house with a market cap of £71m before the deal was announced, though Premier’s offer values the business at 38 per cent higher than that, according to Nik Lysiuk, an analyst at FinnCap. 

Premier, which is also listed on the Aim, had a market cap of £182m before the deal was announced. 

Mr Lysiuk said: “[The] deal is driven by distribution (the golden rule for success in this industry), along with wider product range, greater scale and diversified revenues. All of these are very good reasons and the deal looks to be a good one."

Stuart Duncan, analyst at Peel Hunt said the deal would “strengthen distribution capability at both firms.” 

FTAdviser understands that the combined company is forecast to achieve cost savings of £7m a year after the merger. This will include saving from combining the back office functions of the two companies.

An individual with knowledge of the transaction said this figure was likely to prove conservative, and it is possible that enough cash could be saved in year one to be equal to Miton’s annual profit for 2018 of £8.9m