Two of the oldest names in the UK's financial sector are joining hands after fund management group Schroders said it was considering a takeover of its smaller rival Cazenove Capital.
The deal would see current and former staff involved at the time it demerged from JP Morgan Cazenove in 2005 reap huge gains. Schroders manages £212 billion of funds while Cazenove £18.7 billion.
A key funds team, led by Rihard Buxton recently left Schroders for Old Mutual. According to analysts, the company might have to pay up to £600 million for the deal.
Cazenove's most comparable rival, Rathbones is valued at around 3 per cent of its assets under management, while peers like Jupiter Fund Management trade at around 5 per cent of assets.
According to some analysts, Schroeders certainly needed to do something given the loss of Richard Buxton and other fund managers. They add, clearly they would need a high-quality UK franchise.
The 1823 established Cazenove, grew to emerge as one of the top stockbrokers for the London wealthy classes in 1940s and reportedly counted Queen Elizabeth II among its clients.
Schroeders, last month said its assets had grown to £212 billion following strong inflows during the fourth quarter.
The move by Schroeders, confirmed in a London Stock Exchange statement yesterday, took the market by surprise.
According to analysts, buying its smaller rival would boost Schroeders' existing £212 billion of funds under management by 10 per cent.
According to some analysts it was a logical move by Schroeders, more bolt-on than strategic if a deal came off, but still a very useful addition of funds.
According to Nasdaq, bolt-on acquisition, a term in private equity, is used when a PE backed company (company A) acquires another company (company B) as a "bolt-on" to enhance the value of Company A.
Last month Schroeder's revealed that it had seen strong inflows in its fourth trading quarter and financial circles were taken aback by the potential deal as traditionally Schroders had been one of the least acquisitive of the bigger asset managers, preferring internally-generated growth.
The group, though had made bolt-on purchases recently, including American-based STW Fixed Income Management.