WH Ireland is on the cusp of acquiring rival DFM Harpsden Wealth Management for £7.8m after returning to profitability for the first time in five years.
The Aim-listed wealth manager announced on Monday it had entered into a conditional agreement to acquire the entire issued share capital of the Henley-based manager which has £390m worth of assets. This would lift WH Ireland’s own AUM by 14% to £2bn.
The announcement comes a month after WH Ireland posted £0.5m in profits for the six months ended 30 September, its first interim profit in five years.
Under a new management team led by CEO Phillip Wale (pictured), WH Ireland has been trying to turn its fortunes around by restructuring its wealth management division through implementing aggressive cost cutting measures, consolidating duplicate wealth management platforms and corporate broking trading systems, as well as closing non-performing offices.
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Wale said the Harpsden acquisition would strengthen key elements of WH Ireland’s proposition by bringing in talent and model portfolio leadership as well as strengthening its financial planning capacity.
“The acquisition of Harpsden is in line with our stated strategy of growing the wealth management division through both organic and inorganic growth,” Wale said.
“The progress we have made in reorganising our business is evidenced by our return to profitability and we now have a robust operating platform from which to build both businesses.”
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To fund the purchase, WH Ireland is looking to raise £5.3m by issuing 13.3 million ordinary shares at 40p per share, a 3.6% discount to the closing price of 41.5p on 27 November. The remainder will be covered by two contingent payments of £1.25m each over the next two years.
Longstanding WH Ireland shareholders Polygon Partners and M&G have both conditionally agreed to participate in the placing, with the former committing to buying over 4 million shares and the latter snapping up around 2 million shares. This would take Polygon’s stake to 30%, while M&G would own 15% of the wealth manager.
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In addition, four of the company’s directors, including Wale and head of wealth management Stephen Ford, have subscribed for around 630,000 shares between them.
Wale said the deal with Harpsden is expected to create £0.6m in cost synergies. Harpsden generated an operating profit of £0.88m off of £2.9m worth of revenue in its last financial year. WH Ireland posted a £3.2m loss for the year ended 30 March 2020, down substantially from 2019 when it haemorrhaged £11.3m.
“It is financially attractive and our route to full integration is clear,” he said. “We look forward to welcoming the Harpsden team and feel confident that we are creating a stronger and more capable wealth business with clear differentiation.”
In June WH Ireland offloaded its Isle of Man subsidiary to Ravenscroft, the wealth business that is chaired by Stephen Lansdown.
Earlier this year the wealth manager said it was “in discussions” to acquire certain assets from Wale’s former employer Cantor Fitzgerald Europe.
