AssetCo, the new asset management vehicle of north-east financial services entrepreneur Martin Gilbert, has struck a £27.8 million deal to acquire 30% of Parmenion Capital Partners.
Parmenion – founded in 2007 – is a business-to-business fund investment and advisory technology platform for the wealth and independent financial advisor (IFA) sector, used by around 1,100 adviser firms and 2,600 IFAs.
It is a former subsidiary of Aberdeen Asset Management (AAM), which Mr Gilbert co-founded and led as chief executive.
AAM acquired Parmenion in January 2016 but in March 2021, nearly four years after the £3.8 billion takeover of AAM by Edinburgh-based Standard Life, the business was sold to funds managed by Preservation Capital Partners in a deal worth up to £102m.
Parmenion now employs 211 people and manages about £9 billion of assets under management (AUM). The Bristol-headquartered business has delivered strong AUM growth in recent years, with net inflow growing by around 26% annually since 2015.
For the financial year ended December 31 2020, the firm reported revenue of £29.8m and operating profits of £1m before certain one-offs. At year-end, Parmenion had net assets of £10.8m and £15.9m of cash on the balance sheet.
“The business has a great opportunity to build on its strong IT and client-focused foundations, given the digital transformation we are seeing within the asset and wealth management industry.”
Peter McKellar, chief executive and deputy chairman, AssetCo
AssetCo is paying £27.8m in cash for Parmenion, plus £20.6m on completion of the deal and up to £3.6m due in each of March 2022 and March 2023.
The acquisition is conditional on approval by the Financial Conduct Authority but expected to complete by the end of September.
Gordon Neilly, an adviser to AssetCo and former global head of strategy and corporate development at Standard Life Aberdeen (SLA) will then join the board of Parmenion.
AssetCo said Parmenion’s success was driven by its proprietary technology and strong customer service, offering “significant” opportunities to develop the business further.
Peter McKellar, chief executive and deputy chairman, AssetCo, added: “Parmenion is a market-leading investment and advisory platform.
“The business has a great opportunity to build on its strong IT and client-focused foundations, given the digital transformation we are seeing within the asset and wealth management industry.
“The company has the people and expertise to grow, and to continue to deliver for advisers and customers, as they seek to achieve their long-term investment objectives.”
AssetCo is focused on taking advantage of “structural shifts” within the asset and wealth management industry, such as the increasing use of technology to help individual investors and their advisers.
Mr McKellar added: “It is intended this will be achieved through the acquisition, primarily, of majority stakes in selected businesses which play into these structural shifts, and supported by strong distribution to drive organic growth.
“Few businesses will divert us from this approach, but we were compelled by Parmenion’s market positioning, strong growth potential and excellent management team – and on this occasion we are delighted to have secured a significant minority interest in conjunction with Preservation Capital Partners.”
Mr Gilbert, who quit Standard Life Aberdeen last year after spells as co-chief executive and vice-chairman, owns a near-10% stake in Monmouthshire-based AssetCo as part of a consortium’s 29.8% investment.
Financial heavyweights on board
The consortium partners also include Mr McKellar – a former global head of private markets at SLA subsidiary Aberdeen Standard Investments – and ToscaFund Asset Management, where Mr Gilbert is chairman.
Mr Gilbert, Mr McKellar and their consortium partners have been investors since January 8.
In January and February this year the company acquired five million shares in asset manager River and Mercantile Group, where Mr Gilbert is deputy chairman, for £10.4m.
AssetCo had previously described itself as a provider of management and resources to the fire and emergency services in the Middle East.
Change of direction
On February 8, the firm announced its intention to change tack and focus on the development of an asset and wealth business.
Figures posted by the company earlier this week (June 28) showed no revenue during the six months to March 31.
But the firm accrued £57.8m through a lawsuit and costs stemming from a Court of Appeal ruling, which saw accountancy firm Grant Thornton held liable for negligence after it failed to expose fraud at AssetCo.
AssetCo revealed it had £30.9m at its disposal to fund its growth, following a £26.9m distribution to shareholders.
It also updated the market on a recent acquisition, Edinburgh-based Saracen Fund Managers, in a deal worth £2.75m, being paid for through a share placement.
Mr Gilbert added: “The financial services sector is facing numerous challenges, but the importance of the industry in enabling clients and customers to achieve their financial goals is even greater.
“AssetCo can play a key role by investing in, supporting and developing businesses to meet the needs of investors.
“Our investment in River and Mercantile Group and our conditional acquisition of Saracen Fund Managers are part of this thinking.
“Over the coming months we hope to announce further activity as we roll out AssetCo’s strategy and build the business.”