Schroders To Acquire Adveq Holdings For Private Equity Platform

| About: Schroders Plc. (SHNWF)


Schroders plc has agreed to acquire alternative asset management firm Adveq Holdings for an undisclosed sum.

Adveq has $7 billion in AUM (Assets Under Management) with clients primarily in Western Europe, the U.S., and Asia.

The deal promises to provide Schroders with a diversified set of asset management offerings.

Quick Take

Investment management firm Schroders plc (OTCPK:SHNWF) (LON: SDR) has announced an agreement to acquire private equity manager Adveq Holdings for an undisclosed amount.

Adveq has developed an asset management platform for predominantly privately-held assets.

Schroders hopes to diversify its offerings and capitalize on the cross-marketing opportunities to both firms’ customer bases.

Target Company

Zurich, Switzerland-based Adveq was founded in 1997 by Chairman Bruno Raschle to manage privately-held assets via venture capital, buyout, growth capital, and turnaround situations through primary, secondary or co-investments.

Management is headed by CEO Sven Liden, who joined the firm in 2011. Liden was previously Head of Product Strategy and Business Development at Man Investments, an alternative investment management firm originally founded as a sugar cooperage and brokerage by James Man in 1783.

Below is a brief interview video of Adveq’s CEO Liden on specialist firms:

(Source: thecollerinstitute)

The firm’s limited partners include pension funds, family offices, insurance companies, endowments, and other financial institutions that seek exposure and diversification into alternative asset classes outside of stocks, bonds, real estate or commodities.

Adveq currently has 100 employees managing approximately $7 billion in assets as of March 31, 2017, via its offices in Europe, the United States, and Asia.

Acquisition Terms

Neither company disclosed the acquisition price or terms.

By comparison, Schroders, which is a FTSE 100 firm, manages $465 billion in assets, so is a far larger asset manager than Adveq.

The deal was likely valued at $100 million or less, given a recent deal comparable of HighTower acquiring WealthTrust for $75 million. WealthTrust had AUM of $6.4 billion.

As of December 31, 2016, Schroders had $3.3 billion in cash on hand, so likely had ample resources with which to fund the acquisition.

Schroders said there would be no changes to the team or asset management process at Adveq, and expects the deal to close in 2H 2017.

Rationale and Commentary

Adveq will provide Schroders with diversification into alternative investments. Schroders has existing strengths in real estate and infrastructure finance and will presumably focus on cross-selling its new capabilities to both client bases.

There are also regional synergies as well, with Schroders stating,

With more than $7 billion of client commitments and a predominately Swiss and German client base, Adveq’s clients include some of the largest and most highly regarded institutional investors and pension funds in the region. In recent years, Adveq has also successfully established a premium client base in the US and other international markets.

Furthermore, Peter Harrison, CEO of Schroders added,

This acquisition is characterized by a strong cultural fit between our two firms – a shared client focus and commitment to delivering excellent investment performance. Adveq’s impressive investment proposition, proven track record and strong position within key markets makes this partnership a complementary combination. We look forward to introducing Adveq’s unique capabilities to our clients.

So, the combined entity will have a more diverse set of asset management offerings as investors seek higher returns in the private markets in which Adveq has developed its business.

The key for Schroders will be whether it can scale Adveq’s long-term asset management model and successfully sell its services to its existing client base.

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