Following hard on the heels of the announcement of Liontrust’s proposed acquisition of Neptune, news of the merger of Premier Asset Management and Miton Group is further confirmation of the trend towards consolidation within the asset management industry, if any were needed.
There are a number of reasons why such marriages of convenience take place, but there is no doubt that fund managers continue to be under considerable duress.
An ever-increasing regulatory burden, downward pressure on fees and the growth in popularity of passive investment strategies are combining to create considerable challenges for active asset management houses.
And while there is much to be said for the boutique business model, against a backdrop of squeezed profit margins, attaining scale through M&A activity as opposed to organic growth is becoming ever more attractive.
Upon completion of the merger, the Premier Miton Group, as the new entity will be called, will have assets under management totalling £11.5bn.
This will not be sufficient to catapult the combined business into the ranks of the mega-investment houses, but it will nonetheless create considerable economies of scale.
According to the announcement confirming the proposed merger, it is expected that the alignment of operating platforms alone will create recurring pre-tax cost synergies of approximately £7m a year across the combined group.
This will be in addition to a more diversified revenue stream from an enlarged range of funds, as well as a broader distribution.
The protagonists in the merger claim that the new Premier Miton Group would have been the fifth largest contributor to UK net retail sales for 2018, based on data in 2019’s Pridham Report.
Premier would appear to be the dominant party in the deal, bringing a greater level of AUM. Additionally, post-merger Premier executives are taking most of the top roles, with its chairman Mike Vogel and chief executive Mike O’Shea occupying the same posts in the enlarged company.
However, the company will be headquartered in London, where Miton is based.
This makes sense logistically as this is likely to be a more accessible flagship office.
Whether this will mean all teams will come together in one location is unclear, but we consider it unlikely all personnel will adopt the London office as their home on a full-time basis.
The deal seems compelling from a business perspective and may well be received as good news to shareholders, but what does this mean for financial advisers and their clients, once the ink is dry on the agreement?
As with any merger, the corporate culture embraced by the combined business will be important in ensuring that investment professionals will be able to run money as they have in the past, as well as in retaining key talent.
Premier’s chief executive, Mr O’Shea, has pointed out that the two businesses are “complementary and culturally aligned”, a view that we largely share.