Assetco has inked a conditional agreement to acquire SVM Asset Management but the way in which the £10.7m deal is being funded marks something of a sea change for the Martin Gilbert-backed outfit.
Edinburgh-based independent fund management business SVM was founded in 1990 by managing director and CIO Colin McLean and UK investment director Margaret Lawson.
It is home to around £586m in assets under management and runs five open-ended funds: UK Growth, UK Opportunities, Continental Europe, All Europe SRI and World Equity.
SVM also manages a £6.8m investment trust, SVM UK Emerging Fund, which is listed on the London Stock Exchange.
The SVM funds complement the existing listed equity fund strategies offered by Assetco’s various businesses, the asset manager said, most notably those offered by River and Mercantile.
Following completion, Assetco will have approximately £3.5bn of AUM in listed equity fund strategies across its various businesses.
Funding model shake up
In a departure from its five other M&A deals since inception, payment for SVM will be satisfied by the issuance of up to £9m worth of 1% fixed rate unsecured convertible loan notes in Assetco.
A further £1.7m in cash will be paid on completion, which is conditional on the FCA approving a change in controller, which is expected by the end of September.
Its earlier acquisitions were funded by the issuance of new shares and cash – with the £31m Assetco was awarded in June 2021 after suing its former auditor Grant Thornton doing a lot of the heavy lifting. But the change in funding strategy indicates its cash reserves are getting low.
In January 2021, Gilbert led a group of investors to acquire a 29.8% stake in Assetco with the intention of turning what was a fire engine leasing company into an asset manager with a strong acquisitive streak.
Its first deal was for Edinburgh-based Saracen Fund Managers in May of that year. The £2.75m price tag was paid with nearly 167,000 new ordinary shares plus £664,774 in cash.
In July, it splashed £27.8m on a 30% stake in adviser platform Parmenion Capital Partners, with the initial consideration of £20.6m funded from internal reserves.
That same month, Assetco acquired a majority stake in exchange traded fund provider Rize ETF, paying £16.5m in cash.
The long-running bid to buy River and Mercantile finally made it over the line in February, with a £100m all-share deal agreed. That month also saw it buy Revera Asset Management for £2.8m – funded by the issue of 54,639 new ordinary shares plus £1.9m in cash.
Building up an Edinburgh hub
Once the SVM deal is done, McLean will become a director of Assetco’s Scottish business and focus on ensuring a smooth transition for SVM’s business and clients. McLean will also help set the strategic direction of the company north of the border as part of his new role.
Lawson will continue in her role managing UK equity portfolios, as will global and UK investment director Neil Veitch and European investment manager Hugh Cuthbert.
SVM’s existing 21 employees will remain with the firm.
Assetco chairman Gilbert and deputy chair Peter McKellar will join the board of SVM, alongside Alex Hoctor-Duncan who is chief executive of Assetco’s listed equity platform and of River and Mercantile.
Assetco intends to build an asset management hub in Edinburgh, focused on managing listed equities.
Subject to regulatory approval, SVM is to spearhead Assetco’s plans to have a significant asset management hub in Edinburgh, which already includes Saracen Fund Managers and Revera Asset Management.
The three businesses collectively have over £800m of AUM. All will retain their distinct active equity investment philosophies and client profiles. However, the intention is that they will share compliance, operational, distribution and marketing resources with River and Mercantile.
‘Broaden its client base across the UK and beyond’
McLean said: “When I set up SVM our aim was to leverage quality research and strong fundamentals to underpin our independent thinking and deliver great investor value. I believe that our performance over the years demonstrates that we have been able to achieve this.
“I am pleased that with the backing of Assetco we will be able to continue to build our focus on, and relationships with, existing clients, creating greater value for them, whilst also broadening our client base and growing assets.
Gilbert added: “We are immensely proud to be building an asset management hub in Edinburgh that, over time, will broaden its client base across the UK and beyond.
“SVM is a well-regarded fund management firm, with a recognised investment style and a very strong investment track record. Its business model, people and product offering are its key assets, and it is core to Assetco’s ambitions.
“I have known Colin and Margaret for over 30 years, and I am delighted that both have agreed to remain with SVM. Both have built phenomenal reputations as investment managers over many decades in the industry. The experience and expertise they will bring to Assetco will be invaluable.
“I am also heartened that fund managers of the calibre of Hugh and Neil have committed to the business, as they have important roles to play. We are looking forward to working with the four of them, and the rest of the SVM team, as we develop a business to meet the evolving long-term financial needs of investors.”