- 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
- 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|
|* 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|
|Adjusted EBITDA £m||87.4||49.41||83.1||78.8|
|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|
|Net debt||345.1||280m NAV||274m NAV||464.1m NAV|
|Staff cost/head (£)||77,700||91,480||99,149||80,401|
|Staff cost/other costs (%)||49.7%||72.3%||69.3%||53.0%|
- 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.