Acquisition of Investec Capital & Investments (Ireland) Limited 10th May 2019 Acquisition of ICIIL
. Creating a leading discretionary wealth manager in one of Europe’s fastest growing economies, through combination with our existing business in the Republic of Ireland (“RoI”)
. Founded in the early 1980s, and acquired by Investec Plc in 2012, ICIIL is one of RoI’s 3 largest wealth managers based on AuM1 with a total AuMA of €2.9bn2 and c.5,0002 clients
. ICIIL has seen growth in total AuMA of c.€800m since 2015, representing an annual growth rate of c.8% and has grown its revenues over the last two years at c.20% annually3
. The acquired Business would be expected to have generated revenues of c.€17.0m3 and a pre-tax contribution of c.€4.5m3 in the year to 31 March 2019
. Applying a normalised RoI tax rate, the adjusted net consideration represents a pro forma P/E multiple of c.11x4
. The transaction is expected to complete in the second half of 2019, subject to regulatory approvals
Notes 1 Based on Brewin Dolphin (Ireland) management estimates 2 Figures as at 31 March 2019 3 Figures based on management accounts for the year ended 31 March 2019 and pre-tax contribution calculated from estimated run-rate expenses 4 Calculated from pre-tax contribution of €4.5m in the year to 31 March 2019, taxed at a normalised Irish tax rate of 12.5% 2 Consideration
. The gross consideration will be payable in cash on completion and comprise of:
˗ €37m for goodwill, plus
˗ tangible net assets at completion which are expected to be c.€15m, comprised almost entirely of cash
. However, this level of tangible net assets is substantially above the current expected standalone regulatory capital requirement of the Business of c.€7m
. Adjusting for expected surplus capital, the net consideration is expected to be c.€44m
. The longer term incremental capital requirement of the combined business in RoI as a consequence of the acquisition is expected to be below c.€7m, with the result that the majority of the cash acquired is expected to be released over time
. Based on the adjusted net consideration, the transaction is expected be enhancing to adjusted earnings per share1 on a pro forma basis from completion
Notes 1 Excludes amortisation and one-off transaction costs 3 Strategic rationale
Brewin Dolphin considers all acquisition opportunities on the basis of the following criteria
1. Cultural
Strong cultural fit between the teams
Client-centric ethos
2. Strategic growth
Building scale as a top 3 wealth manager in a growing RoI1 market
Attractive demographic profile in RoI – youngest population in Europe
Continued evolution from advisory to discretionary services
3. Financial impact
Business demonstrating robust growth
Enhancing to adjusted earnings per share from completion2
Attractive pro forma P/E multiple of c.11x3
Notes 1 Based on Brewin Dolphin (Ireland) management estimates 2 Excludes amortisation and one-off transaction costs 3 Calculated from pre-tax contribution of €4.5m in the year to 31 March 2019, taxed at a normalised Irish tax rate of 12.5% and applied to an adjusted net consideration of €44m 4 Investec Capital & Investments (Ireland) Limited
A strategic fit . ICIIL is a well-established, high-quality wealth management business, servicing clients in RoI for Mix of Assets1 over 30 years Total: €2.9bn . Headquartered in Dublin with an office in Cork
. Total assets under management and administration Execution has grown from €2.1bn in March 2015, to its current only level of €2.9bn1 representing an annualised growth Discretionary rate of c.8% 21% 36% ˗ Percentage of discretionary assets has increased from 21% to 36% over this period
. We expect, in line with the trend already shown in the 33% business, that the percentage of discretionary assets 10% in the business will increase further over time Dealing with advice Advisory . Separate, standalone MiFID entity, regulated by the managed Central Bank of Ireland (“CBI”), with minimal Brexit implications
Notes 1 As at 31 March 2019 5 Attractive Irish market
Ireland represents an attractive and growing market
. Fastest growing economy in Europe for 5 consecutive years from 2014-20181; with GDP growth of 6.7% in 20182
. Second highest real GDP growth forecast in Europe for 2019 (4.5%) and 2020 (3.8%)2
. In 2017, it recorded the 6th highest GDP per capita globally (c.$70k)3
. High household savings rate of 12.3% in January 2019 compared to 4.8% in the UK4
. Europe’s youngest population, with approximately 1/3 of the population currently under the age of 255
Notes 1 Reuters (March 2019) 2 European Economic Forecast, Autumn 2018, European Commission (November 2018) 3 World Bank Data 4 Trading Economics 5 Census 2016 6 Combined business profile
Key pro forma KPIs
Combined BDI1 ICIIL1 (pro forma) Pro forma AuMA split (31 March
AuMA (€bn) €1.7bn €2.9bn3 €4.6bn 2019)
AuA Clients (#) c.1,700 c.5,000 c.6,700 29%
Discretionary AuM 55% Revenue (€m) €9.8m2 €17.0m3 €26.8m
16%
Other AuM Number of staff 34 524 86
Notes 1 Figures as at 31 March 2019 2 Annualised figure based on performance for 6 months to 31 March 2019 3 Figures based on management accounts for the year ended 31 March 2019 4 Represents only the employees expected to transfer at completion 7 Synergies
Transaction structure provides cost synergy benefits from completion and minimises integration risk
. The Transaction is being structured whereby Brewin Dolphin (Ireland) will acquire the Business with the investment team and only the necessary support staff required on an ongoing and combined basis to manage the expanded business
. Transaction will enable the Group’s business in RoI to leverage its efficient existing platform to deliver cost synergy benefits from completion and minimises integration risk
. Potential longer term further cost reduction from recently announced Group infrastructure initiatives
. Limited client overlap between the two businesses
. Brings substantial scale and capacity to exploit significant growth potential in RoI wealth management market
8 Integration
A proven recent track record of successfully migrating and Recent history of growth via M&A integrating businesses 2011 . Tilman (Ireland)
. Brewin Dolphin has a proven track record in integrating businesses both in Ireland, having acquired Tilman in 2011, and in the UK 2016 . Duncan Lawrie Asset Management (London / South East) . Full integration is expected to be completed within 6 months following completion, during which time a TSA will be in place to maintain a range of support services currently provided by the Investec Group 2018 . Clark Thomson (Dundee) . Aylwin (Southern England)
2019 . Mathieson Consulting (Midlands)
9 Disclaimer
The information contained in this document has been prepared by Brewin Dolphin Holdings PLC (the "Company"). No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Company or by any of its affiliates or agents as to or in relation to, the accuracy or completeness of this document or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed. Notwithstanding the aforesaid, nothing in this paragraph shall exclude liability for any undertaking, representation, warranty or other assurance made fraudulently.
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10 May 2019
10 12 Smithfield Street, London, EC1A 9BD Tel: 020 3201 3900 Email: [email protected] https://www.brewin.co.uk
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