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News

  • Bids – After Charles Taylor yesterday and Smith & Williamson going to private equity backed forms we have Statpro today for £161m. Happy Friday.
  • Manolete AGM statement is reassuring with 60 new cases invested and 18 completed since March compared to 12 in H1 2018.

Smith & Williamson – Acquisition by Tilney

Valuation £625m

  • Offer – The price of Smith & Williamson has been agreed with the private equity backed Tilney at £625m. That represents 2.3X the (slightly dated) April 2018 reported turnover.  Or 12.6X Adjusted EBITDA.   
  • Valuation – This is a comparable valuation to Brooks Macdonald and a little lower than Rathbone who looked at Smith & Williamson in 2017.
Mkt Cap Mkt Cap/EBITDA Mkt Cap/Rev  
Brewin 958 10.4 2.9  
Rathbone* 1338 14.6 4.3  
Brooks Macdonald 274 12.3 2.6  
* PBT in place of EBITDA as it is a bank
  • Sector comps The stats below show the typical private equity traits of private equity for Tilney. High operating margins off the back of tightly controlled staff costs and a balance sheet that has been stripped to the bone (net debt £345m).
Tilney Smith & Williamson Brewin Rathbone IM
Year End Dec 18 April 18 Sept 18 Dec 18
AUM (m) 23,000 20,100 42,800 38,500
Clients (k) 100 62 60
   
Revenue £m 228.9 266.7 329 275.3
Adjusted EBITDA £m 87.4 49.41 83.1 78.8
Costs £m 177.1 218.0 252.3 196.5
Staff Costs £m 88.1 157.5 174.8 104.2
   
Net inflows p.a 2.50% 2.80% 3.70% 3.40%
Average head count 1133 1722 1763 1296
   
Revenue yield on avg. AUM 97.4 132.6 79.3 76.3
EBITDA margin 38.2% 18.5% 25.3% 28.6%
   
Net debt 345.1 280m NAV 274m NAV 464.1m NAV
   
Staff cost/head (£) 77,700 91,480 99,149 80,401
AUM/head (£m) 20.3 11.67 24.28 29.71
AUM/Client (k) 230 690 642
Client/Head 88 35.2 46.3
Staff cost/other costs (%) 49.7% 72.3% 69.3% 53.0%
   
Offices 55 12 30 15
  • Conclusion –I wonder if this combination could challenge the traditional models of Brewin and Rathbone, now their AUM are similar. Certainly its easier to pay up when you can strip out the balance sheet while Brewin raised £60m fresh equity last May for acquisitions. This may well put pressure on the traditional models. Certainly for Brewin, whose shares are looking cheap now they are down 20% from their January 2018 peak they run the risk of being a target.