AssetCo has reached an agreement to acquire the entire issued share capital of SVM Asset Management for a total consideration of approximately £10.7m.
The consideration will be satisfied by the issue of up to £9m, 1% fixed rate unsecured convertible loan notes in AssetCo and, subject to balance sheet adjustments, approximately £1.7m in cash, to be paid on completion.
The notes may, at the option of the company or a majority of the holders, be converted into fully paid ordinary shares of 10p each at an effective issue price of £14.50 per share.
The deal is conditional on approval by the Financial Conduct Authority to a change in controller, which is expected to occur by the end of September.
SVM is an independent fund management business based in Edinburgh, which was founded in 1990 by Colin McLean and Margaret Lawson, whom, together with a family trust, are the significant majority owners.
Following completion, McLean, who is managing director and chief investment officer, will become a director of AssetCo’s Scottish business.
He will focus on ensuring a smooth transition for SVM’s clients, as well as helping to set the strategic direction of AssetCo’s Scottish business. A statement noted that it is the firm's intention to build an asset management hub in Edinburgh, focused on managing listed equities.
Lawson, who is UK investment director at SVM, will continue in her role managing UK equity portfolios, as will Neil Veitch, global and UK investment director, and Hugh Cuthbert, European investment manager. SVM’s existing 21 staff will continue to be employed.
Martin Gilbert, chairman of AssetCo; Peter McKellar, deputy chairman of AssetCo; and Alex Hoctor-Duncan, chief executive of AssetCo’s listed equity platform and of AssetCo's River and Mercantile asset management business; will all join the board.
SVM currently has around £586m of assets under management, including five open-end funds: UK Growth, UK Opportunities, Continental Europe, All Europe SRI and World Equity. It also manages a UK Emerging Fund, a £6.8m investment trust listed on the London Stock Exchange.
SVM generated turnover of £4.3m and a profit before taxation of £2m for the financial year ended 31 December 2021, with net assets of £14m at that point.
Post a restructuring that is currently being undertaken, it is anticipated that SVM will have net assets and net cash reserves of approximately £4m each. For the three months ended 31 March 2022, the firm generated turnover of £945,451 and an operating profit of £139,726.
AssetCo believes that the acquisition will enhance its growing Scottish brand and bolster the strength of its Scottish board, with the addition of McLean, finance director Garry Fyfe and non-executive director Jonathan Hewitt.
It stated that there are "significant opportunities" to enhance the distribution and marketing of SVM’s existing funds and, over time, to broaden the product offering.
The SVM funds also complement existing listed equity fund strategies offered by AssetCo’s various businesses, most notably those offered by River and Mercantile Asset Management.
Following completion AssetCo will have approximately £3.5bn of assets under management in listed equity fund strategies across its various businesses.
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 (subject to regulatory approval).
In aggregate the three businesses have over £800m in assets. All three businesses 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 Asset Management.
McLean commented: “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.
“I have known Colin and Margaret for over 30 years, and I am delighted that both have agreed to remain with SVM.
“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.”
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