LONDON: Brooks Macdonald Group’s wholly owned subsidiary Brooks Macdonald Asset Management (International) Limited has entered into a binding agreement to acquire the Channel Islands wealth management and funds business of Lloyds Bank International Limited.

The total consideration is expected to be up to £9.63 million, including £2.5 million of regulatory capital, with initial consideration being up to £9.30 million.  The full consideration will be paid in cash from Brooks Macdonald’s existing financial resources.  A contingent cash consideration of up to £0.33 million will be payable two years after completion depending upon the acquired business meeting certain pre-agreed performance targets relating to the retention of portfolio clients.  Completion is expected to take place in the fourth quarter of 2020 subject to regulatory approval.

The acquisition consists of 100 percent of the share capital of Lloyds Investment Fund Managers Limited (LIFML) and the investment management assets and investment management client relationships of the discretionary investment management clients of Lloyds Bank International Limited (LBIL), which is a subsidiary of Lloyds Bank Corporate Markets plc (LBCM).

LBIL and LIFML are both 100 per cent owned subsidiaries of Lloyds Holdings Jersey Limited (LHJL) whose ultimate parent is Lloyds Banking Group plc (LBG).

The Group is also pleased to announce that it has reached agreement in principle with LBCM on a reciprocal arrangement whereby the two parties will introduce relevant services to each other’s clients.

LBIL’s wealth management and offshore funds business has a high quality investment offering with an affluent and high net worth client base and strong intermediary relationships, with Funds under Management (“FUM”) of £1.0 billion1 all managed on a discretionary basis, comprising:

.               An investment management business with c.£500 million in FUM serving c.1,200 portfolio clients

.               A funds business with c.£500 million in FUM, predominantly distributed through c.50 independent financial advisers, and serving c.10,500 mainly personal clients.

.               The Acquisition has a compelling strategic rationale for the Group, in line with its strategy to consider selective high quality inorganic opportunities, alongside its continuing focus on organic growth from intermediary relationships.

It is a compelling move for Brooks Macdonald International, which further transforms the international business, building on its reinvigoration under Andrew Shepherd and his management team; increases international FUM by up to two-thirds to £2.5 billion, and brings up to 1,200 private clients; adds multi-asset and fixed income fund capability, augmenting International’s proposition to clients, advisers and trustees; strengthens the Group’s international intermediary distribution reach.

Following completion, the combined business will be based at International’s office in Jersey and the businesses being acquired will be rebranded as Brooks Macdonald International.  A number of current LBIL staff members will be offered roles in the combined business to expand and strengthen International’s capability, ensuring continuity of customer service.

The Group intends to operate the business on a different model to that currently employed by Lloyds.  Brooks Macdonald will outsource fund administration and leverage its existing investment management strengths to bring that activity in-house.  The Company expects this change to the operating model to drive a material uplift in profitability.

Brooks Macdonald International and LBIL expect to build on the relationship developed through the Transaction to create a deeper ongoing business partnership:

Brooks Macdonald International will introduce clients where appropriate to Lloyds Bank International’s banking services and LBIL will reciprocate, introducing banking clients to the Company’s international investment management and financial planning services

International and LBIL will explore further opportunities for co-operation in product and service development.

Caroline Connellan, CEO of Brooks Macdonald, commented: “Since his appointment as CEO of International last April, Andrew Shepherd and his team have led the reinvigoration of the business, delivering for clients, advisers and trustees.  The acquisition of Lloyds’ offshore wealth and funds business adds to this transformation, bringing greater scale, new capabilities and expanded distribution reach.  As well as the good strategic fit, our discussions with Lloyds Bank International have shown we have similar cultures with a shared strong focus on clients and intermediaries.  This acquisition, the second for Brooks Macdonald in this financial year, is a further step forward in achieving our growth ambitions, complementing our organic strategy, creating value for shareholders and bringing benefits for clients and intermediaries.”

Andrew Shepherd, CEO of Brooks Macdonald International, added: “We are delighted to have agreed this acquisition which represents a major move forward for the International business.  It increases International FUM materially, brings a high quality discretionary portfolio client base and adds a strong multi-asset and fixed income fund range to our proposition to clients, advisers and trustees.  It also brings additional intermediary relationships, increasing our distribution reach.  I am particularly pleased that the strong relationship we have built with the Lloyds  Bank International management team means that we are putting in place a partnership agreement for cross-referral of clients with a shared commitment to explore other ways for the businesses to co-operate.”

Alasdair Gardner, Islands Director of Lloyds Bank International, commented: “When we decided to sell our Islands wealth and funds business, it was of paramount importance that we found a company with a similar culture to our own and with a strong client focus at its heart, such as Brooks Macdonald.  This is particularly important as most of the discretionary portfolio clients are also banking clients of Lloyds Bank International. We wanted to be confident that our clients and intermediary supporters would continue to receive the highest levels of service and an owner that they would be happy to work with in the future.  Throughout our discussions, we have been impressed by the strong client focus and growth aspirations of the Brooks Macdonald International management team and we are very pleased to have reached this agreement with them.”