Collateral

UK Wealth Management Mergers and Acquisitions Hit in Foamy Territory

People maintain social distancing as they queue outside a NatWest bank in London, Britain March 26, 2020. REUTERS/Hannah McKay

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LONDON, April 4 (Reuters Breakingviews) – Britain’s NatWest (NWG.L) is among those eyeing private equity firm Tilney Smith & Williamson, Sky News reported. Interest from the 23 billion pound lender closely follows that of 1.6 billion pounds from the Royal Bank of Canada (RY.TO) stung on Brewin Dolphin (BRW.L), and less than a year after the takeover of JPMorgan (JPM.N) Nutmeg, a so-called robo-advisor. The appeal is obvious: banks want fast-growing paying companies to achieve higher valuation multiples. And wealth managers face growing investment needs as services move online. Big lenders, stuffed with excess capital from the pandemic, can help cover those costs.

But they will have to pay. RBC paid the equivalent of 2.8% of Brewin’s assets under management, and a whopping 60% above undisturbed equity value. Tilney’s £2.5bn to £3bn valuation would be even larger by 4-5% of its assets under management. The digital transformation of the fund industry means companies have plenty of room for growth. But the prices of mergers and acquisitions too. (By Liam Proud)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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