Brewin Dolphin Holdings PLC has announced that its wholly owned subsidiary in RoI, Brewin Dolphin Wealth Management Limited, has agreed to acquire the wealth management business of the Investec Group in RoI through the acquisition of Investec Capital & Investments (Ireland) Limited. This Transaction is subject to certain regulatory approvals and completion is expected to take place in the second half of 2019.
The consideration will be payable in cash and comprise of a payment on completion for goodwill of €37.15m as well as a payment to reflect the value of net tangible assets in the Business at that date. Net tangible assets at completion are expected to be c.€15m, and comprised almost entirely of cash. In the event that the tangible net assets are higher than this, the payment is capped at €17m. The current standalone regulatory capital requirement of the Business is c.€7m. The longer term incremental capital requirement of the combined business in RoI as a consequence of the acquisition is expected to be below this figure, with the result that the majority of the cash acquired is expected to be released over time.
The Business, which manages and administers €2.9bn in client funds, represents a rare opportunity for Brewin Dolphin to increase its scale in RoI, one of Europe’s fastest growing economies. RoI represents a particularly attractive market given the favourable demographics, with the youngest population in Europe. Following completion of the Transaction, Brewin Dolphin (Ireland) will manage and administer funds in excess of €4.6bn in RoI.
The Business is a well-established and high quality wealth management business, headquartered in Dublin, with an additional office in Cork, and has grown its total funds from €2.1bn in March 2015 to €2.9bn as at 31 March 2019. During this period, the proportion of assets managed on a discretionary basis has increased steadily from c.21% to c.36%, and this trend is expected to continue.
The Transaction is being structured whereby Brewin Dolphin (Ireland) will acquire the Business with the investment team and only the necessary support staff required on an ongoing and combined basis to manage the expanded business. This will enable the Group’s business in RoI to leverage its efficient existing platform to deliver cost synergy benefits from completion and substantially reduce integration risk.
Based on the management accounts for the year ended 31 March 2019, the revenues of the Business in the year to 31 March 2019 were c.€17.0m, which would represent an annualised growth rate of c.20% over the last two years. The costs within the Business, together with incremental costs to be incurred by the Group to run the Business, are expected to amount to c.€12.5m. The pre-tax profit contribution related to the Business is therefore expected to be c.€4.5m. The Transaction is expected to be enhancing to adjusted earnings per share on a pro forma basis from completion.
David Nicol, Chief Executive, commented:
“This acquisition, which is consistent with our strategy of growth in assets under management, provides us with an exciting opportunity to strengthen substantially our existing presence in the Republic of Ireland, one of Europe’s fastest growing economies. We will also be in a stronger position to benefit from the country’s growing demand for discretionary and advice-led services, supported by favourable demographics, with the country having the youngest population in Europe. Our businesses are highly compatible in terms of culture, values, investment philosophy and client centric approach, which combined with our established platform, will enable us to meet more effectively the growing demand for wealth management services in both the UK and the Republic of Ireland.”