Wren Sterling Pitch Document

BRIEFING DOCUMENT 

W REN STERLING 

DECEMBER 2016

Your deal team 

Your team has years of experience in the Financial Services and PE M&A sectors 

James Barraclough 

DD: +44 7967198 066 

Email: james.barraclough@cwicf.com 

James is Head of Financial Services at Clearwater International. He has been 

in the industry for over 15 years advising on corporate and private equity 

transactions 

Role: 

• Overall leadership and responsibility for delivering your transaction 

• Leads key meetings and negotiations 

• Sets strategy in partnership with Michael and between them ensure that 

they lead all key meetings and negotiations 

• Sector knowledge and insight into investors 

• Previous clients include: MoneyFarm, Walker Crips and Punter Southall 

Michael Reeves 

DD: +44 796 764 7131 

Email: michael.reeves@cwicf.com 

Michael is Chief Executive of Clearwater International, having led the formation 

of the group. He has been involved in corporate transactions internationally 

throughout his career and is a founding partner of Clearwater. Michael qualified 

as a chartered accountant with Touche Ross and worked in Australia with 

Coopers & Lybrand before returning to the UK 

Role: 

• Supports James in leadership of the project and in setting the strategy 

• With James ensures all key meetings and negotiations are partner led 

• Sounding board for the team on key issues 

Mark Lawrence 

DD: +44 7939 934 874 

Email: mark.lawrence@cwicf.com 

Mark joined Clearwater International in 2015 as an associate. He previously 

worked at PwC within the Transaction Services team where he qualified as a 

chartered accountant 

Role: 

• Responsible for day to day project management and key documentation 

• Significant interaction at all stages of the deal including key meetings 

• Supports partners in key negotiations 

• Previous deals include: Stonehage Fleming, Babington 

Robert Herscovici 

DD: +44 7525 590 890 

Email: robert.herscovici@cwicf.com 

Robert is an associate in our Financial Services analyst team having previously 

worked in the M&A industry for PwC 

Role: 

• Identifies and profiles prospective investors 

• Provides insight into the positioning of the business with prospective 

investors 

• Analyses precedent transactions and comparable listed companies to 

support valuation 

CLEARWATER INTERNATIONAL PRESENTATION | DECEMBER 2016 

2

Agenda 

1. Introduction 

2. Our credentials 

3. Market overview 

4. Valuation 

5. Options 

6. Strategic buyers & investors 

7. Conclusion 

A 

Appendix 


3

01 

Introduction

Our key messages 

We understand Wren Sterling’s market and are the right partners to advise you 

going forward 

• Fundamental shifts in market dynamics caused by 

technological and regulatory developments 

• A buoyant market with high levels of deal in a highly 

fragmented sector 

• Profitability margins, scale and type of permissions 

over managed assets are high influencing factors 

towards valuation 

Market 

Valuation 

Options 

Buyers 

• We believe that the three options to consider are: 

starting a process now, continue growth plan or 

engage in aggressive growth plan before disposal 

• There is a wide pool of buyers for Wren Sterling 

including financial advisors, asset managers, 

international players and insurance companies. 


5

02 

Our credentials

Our credentials 

Our team has vast experience in the wealth management sector 

Clearwater International Deals 

Cross-border WIP 

BLOXHAM 

BFINANCE 

Ireland’s oldest stockbrokers 

Advised the shareholders of 

Bloxham on the sale of the private 

client division to Davy 

stockbrokers 

Independent and privatelyowned, 

investment consulting 

practice 

Clearwater International advised 

on the MBO of the firm. The 

transaction was funded by debt 

provider, BMS Finance 

Spain-based asset and wealth 

management firm with €4bn 

assets under management 

Clearwater International is 

advising the main shareholder on 

disposal options 

Portuguese asset manager 

with over €13bn in assets 

under management 


advising the parent company, a 

large Portuguese bank, on exit 

options 

AMLIN 

Meilleur taux 

Global financial services firm 

The team at Clearwater 

International team advised Amlin 

on the acquisition of AngloFrench 

Underwriters 

Financial advisor with special 

focus on mortgages 

Clearwater International team 

advised BPCE bank on the 

acquisition of Meilleur taux 

Ireland’s largest wealth and 

investment manager 


exploring international buy-side 

opportunities 

Danish investment manager 

focused on the renewable 

energy sector 


currently advising the 

shareholders on a sell-side 

mandate 

The team advised previous clients including: 

MoneyFarm Spa Plurimi LLP Walker Crips Punter Southall 

Online wealth manager 

focussed on the passive 

investment market (roboadviser) 

Independent wealth and 

investment manager offering 

financial advice to retail and 

commercial clients 

Integrated financial services 

firm offering investment 

management, stockbroking, 

wealth management and 

pensions advice 

Financial services firm offering 

consultancy on employee 

benefits, pensions 

administration and investment 

management 


7

03 

Market overview

Market overview: UK wealth management 

Strong regulatory tailwinds are driving market consolidation 

• So far 2016 continued the trend of unprecedented levels of M&A activity across the asset and wealth management 

sector seen during 2015. This has been fuelled by an increasing number of corporates and private equity firms 

seeking either to grow their existing franchises or establish a foothold in the UK as one of the key global wealth 

markets. 

• Growth prospects for the industry also look solid. The heady mix of new pension freedoms, low interest rates, and 

the continued strength of the property market are tempting many consumers to enter the industry for the first time. 

Indeed, the private client market is forecast to grow at a CAGR of 9.3% to reach £1.1tn by 2019. A number of key 

drivers are making the UK market attractive to investors 

Regulation: The continued development of the regulatory environment – such as through increased 

pension freedoms, the reduction in annual and lifetime allowances and the Financial Advice Market 

Review - is driving strong growth in the market 

Technology: Advances in technology are driving efficiencies and creating opportunities to better 

engage with clients. Advisors are increasingly looking to build complementary propositions such as 

robo-advice and D2C (direct to consumer) capabilities 

Fragmentation: A highly fragmented market creates opportunities for building scale. The changes in 

technology and regulation are driving consolidation among small and medium-sized firms as they look 

to benefit from economies of scale and improve margins 

• Consolidation in the IFA market was particularly strong in the lower end of the market driven by acquisitive groups 

such as Succession, Mattioli Woods, Bellpenny and AFH Financial. These four groups have been accountable for 

over 80 acquisitions in the market since the beginning of 2012. Deal values of these acquisitions did not typically 

exceed £10m. However, with the backing of PE and access to capital markets, these groups could potentially be 

interested in opportunities to acquire targets of Wren Sterling’s size in a highly strategic play to gain rapid scale. In 

an unsuccessful bid earlier this year AFH Financial, the smallest of the four, attempted a takeover of Lighthouse 

Group offering £17.4m 

AUM £11bn AUM £7bn 

Acquisitions since 2012 18 Acquisitions since 2012 8 

Largest acquisition £10m Largest acquisition £10.3m 

AUM £3bn AUM £2bn 

Acquisitions since 2012 28 Acquisitions since 2012 26 

Largest acquisition £10m Largest acquisition £4.1m 

• Consolidation prospects in the UK market are appealing for private equity investors too, driven by growing costs 

from an increasingly stringent regulatory environment. In the past, private equity firms have been somewhat notable 

by their absence from the market, but the Retail Distribution Review – which makes scale essential in the industry – 

has been a particular driver of PE activity. Recent PE deals include Synova acquiring financial adviser consolidator 

Fairstone, and Baird Capital acquiring Bfinance. Close Brothers Asset Management has been particularly 

acquisitive, buying Eos Wealth Management and Mackay Stewart & Brown, while a major recent deal saw SVG 

Capital acquired by US-based HarbourVest Partners for €1.17bn 


9

Market timeline 

Recent market developments are fundamentally impacting the market 

• In the UK, the Retail Distribution Review was designed to improve standards of advice and fee transparency and 

has changed the way in which fees can be charged by financial advisers. Rather than accepting commission as a 

reward for recommending or selling a particular financial product, advisers now have to agree a fee upfront with 

their clients 

• The Markets in Financial Instruments Directive (MiFID) is the framework of EU legislation for investment 

intermediaries that provide services around shares, bonds, units in collective investment schemes and derivatives, 

and for the organised trading of financial instruments. MiFID is now being revised to improve the functioning of 

financial markets in light of the financial crisis and to strengthen investor protection. The changes are currently set 

to take effect from 2018 with the new legislation known as MiFID II - this includes a revised MiFID and a new 

Markets in Financial Instruments Regulation (MiFIR) 

• The short term focus for asset managers following the Brexit vote is likely to be the wider economic impact of the 

uncertainty on market and currency volatility. But the long-term impact on the UK’s sizeable wealth management 

industry remains very unclear and much will depend on the eventual terms of the exit. Particular confusion 

surrounds how Brexit will affect UK compliance with MiFID II as countries which are not part of the EU - but which 

want to sell their products and services in the area - must open a branch within EU borders operating in equivalence 

with European regulatory standards 

Technology and regulatory developments 

RDR Review 

MiFID II 

Delayed to 2018 

Sunset Clause 

20 

18 

16 

14 

12 

10 

8 

6 

4 

2 

0 

Number of wealth management deals 

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 

2012 2013 2014 2015 2016 

Quilter Cheviot/ 

Bridgepoint 

Succession/ 

Inflexion 

Quilter Cheviot/ 

Old Mutual 

Ashcourt Rowan/ 

Towry 

Towry/ 

Tilney BestInvest 

BestInvest (Brokers)/ 

Permira 

7IM/ Caledonia Investments 

Fairstone/ 

Synova 

John Charcol and Wren Sterling/ Palatine 

Notable mergers and acquisitions 


10

04 

Valuation

Market: Trends, Comparable Deals & Structure 

Valuation is influenced by three main factors: scale, quality of assets and profitability 

Methodology & trends 

• We have analyzed a number of valuation metrics including EBITDA, revenue and recurring revenue multiples as 

well as EV as a percentage of assets under management. Our research of precedent deals reveals a number of 

influencing factors on value particularly the impact of scale, quality of assets under management and profitability 

Average EV/EBITDA multiple 

9.7x 

12.6x 12.4x 

13.7x 

7.2x 

5.5x 

6.8x 

Target 

Year 2012 2013 2013 2014 2015 2015 

EV(£m) 180 45 6 160 7 100 

AuM (£m) 8,200 1,500 420 5,000 160 9,500 

EBITDA (£m) 14.3 3.6 0.8 11.7 1.3 14.7 

EV/AUM 2.2% 3.0% 1.4% 3.2% 4.4% 1.1.% 

Buyer 

AuM scale premium 

• Precedent transactions show evidence of an AuM scale premium with buyers usually paying above 3% of AuM for 

wealth managers administrating total assets over £3bn. A typical EV for firms with less than £3bn assets under 

management is around 2% of total AuM 

1.9% 

Average EV/AUM 

3.9% 


6.6% 

1.3% 1.1% 

2.4% 

3.0% 3.2% 

2.3% 

3.5% 

Target 

Year 2015 2014 2016 2013 2014 2015 2014 2016 

EV(£m) 8.3 10 43 84 160.0 123.9 280 600 

AUM (£m) 650 900 1,843 2,790 5,000 5,500 8,000 9,100 

EV/AUM 1.3% 1.1% 2.4% 3.0% 3.2% 2.3% 3.5% 6.6% 

Buyer 


12

Market: Trends, Comparable Deals & Structure 

Valuation is influenced by three main factors: scale, quality of assets and profitability 

Assets under discretionary management vs advice/influence 

• Assets held under discretionary management (in-house or outsourced) attract higher valuation multiples as 

opposed to those under advice/influence. Buyers value the superior “client stickiness” associated with discretionary 

managed assets as well as the higher profitability margins that are derived from the additional added-value services 

Discretionary AUM 

AUA/AUI 

1.7% 


2.6% 


4.2% 


77% 

23% 

100% 100% 

56% 

44% 

43% 

57% 

14% 

86% 96% 100% 

Target 

Year 2013 2016 2015 2015 2012 2016 2013 2013 

EV(£m) 14 3 22 124 32 600 45 84 

AUM (£m) 1,300 150 925 5,500 1,079 9,100 1,500 2,790 

EV/AUM 1.1% 1.7% 2.4% 2.3% 3.0% 6.6% 3.0% 3.0% 

Buyer 

Deal payment structure 

• Transactions are often being structured with an element of contingent consideration. Typically, this is around 35% 

and is based on future performance targets. Some acquirers have also settled a proportion of their payments in 

shares. Where shares were offered, these would usually cover approximately 25% of the total consideration. 

46% 

31% 

23% 

40% 

30% 

55% 58% 

12% 

88% 

28% 

16% 

42% 

Contingent 

Shares 

Cash 

48% 

6% 

46% 

30% 

45% 

18% 

24% 

56% 58% 

Target 

Kudos IFS 

EV(£m) 6 12 8 9 22 14 32 35 

Buyer 


13

Profitability premium 

Empirical evidence shows that profitability has a high impact on valuation 

• The table below illustrates market profitability margins of financial advisors similar to Wren Sterling. On average, the 

peer group generates an EBITDA margin of 29.5%. Average EBITDA as a percentage of assets under management 

is 0.3%. Applied to Wren Sterling’s £1.8bn of income generating AuM this would imply a corresponding EBITDA of 

£5.4m 

Company AuM £m Sales £th EBITDA £th EBITDA margin 

Courtiers Investment Services Limited 800 8,776 2,305 26.3% 

Independent Investment Analysis Limited 350 7,014 1,923 27.4% 

Partners Wealth Management LLP 900 6,196 3,511 56.7% 

Skerritt Consultants Limited 650 4,891 1,547 31.6% 

Perspective Financial Group Limited n.a. 16,525 3,473 21.0% 

Lift-Financial Group Ltd 1,300 3,763 205 5.5% 

Epoch Wealth Management LLP 400 3,020 1,510 50.0% 

Speirs & Jeffrey 5,500 21,407 7,403 34.6% 

N W Brown Group Limited 918 8,820 2,800 31.7% 

Foster Denovo Group PLC n.a. 19,783 -863 -4.4% 

Chadney Bulgin LLP 730 6,034 3,112 51.6% 

Ascot Lloyd Holdings Limited 2,000 14,132 3,113 22.0% 

Average 1,355 10,030 2,503 29.5% 

Wren Sterling 1,800 13,757 -1,445 -10.5% 

Profitability premium 

• The precedent transactions below illustrate the existence of a profitability premium, measured as EBITDA margin. 

Targets generating under 15% EBITDA margin have been acquired on average for 1.8% of assets under management, 

while companies generating EBITDA margins between 15% and 30% have received an average valuation of 2.9% of 

assets under management. Finally, wealth managers with superior returns of over 30% EBITDA margins have been 

acquired on average for 4.7% of assets managed. Therefore, we believe achieving profitability is a milestone that would 

contribute significantly to a more successful disposal of Wren Sterling 

Under 15% margin 

Average EV/AuM – 1.8% 

Margin between 15% and 30% 


Over 30% margin 


60% 

50% 

40% 

EV/AUM 

EBITDA margin 

30% 

35% 

50% 

7.0% 

6.0% 

5.0% 

30% 

20% 

10% 

0% 

-10% 

-1% 

1.1% 

10% 

1.6% 

12% 

14% 17% 

2.3% 2.4% 2.2% 

20% 24% 

3.5% 

3.0% 

6.6% 

3.2% 

4.4% 

4.0% 

3.0% 

2.0% 

1.0% 

0.0% 

Target 

Kudos IFS 

Year 2013 2011 2015 2016 2012 2015 2013 2016 2014 2015 

EV(£m) 14 9 124 43 180 585 45 600 160 7 

EBITDA 

margin 

-1% 10% 12% 14% 17% 20% 24% 30% 35% 50% 

EV/AUM 1.1% 1.6% 2.3% 2.4% 2.2% 3.5% 3.0% 6.6% 3.2% 4.4% 

Buyer 


14

05 

Options

Est. 

Value 

Size 

Positives 

Negatives 

Value enhancement levers 

Your options 

We envisage three main potential options 

I II III 

Sell now taking advantage of trade 

acquirers in the market. Return 

crystallised now with no further 

requirement for additional investment 

from existing shareholders 

Growth plan as presented (organic and 

small scale book acquisitions) then sell 

in medium term. Take advantage of a 

larger / profitable business but unclear 

future buyer appetite 

Value build through more aggressive 

M&A strategy 

FY16 Sales: £13,8m 

FY16 EBITDA: £-1.45m 

AUM: £1.8bn 

FY19 Sales: £23m (20% growth in 2019) 

FY19 EBITDA: £2.0m (100% growth in 2019) 

FY19 AUM: £2.4bn (+£100m in 2019) 

FY19 Sales: £33m 

FY19 EBITDA: £6m 

FY19 AUM: £3.6bn 

£20m - £25m £30m - £40m £60m - £70m 

Scale of AuM will be attractive to trade acquirer 

Multi channel approach to market of interest to 

acquirers 

Arguable scarcity of other acquisitions in market 

helps attractiveness - other assets for sale are 

either much smaller e.g. Ludlow £700m AUM or 

larger with high price aspirations e.g. Cardale 

£40-50m 

Larger business should enhance AuM valuations 

Profitability will enhance valuation yet further 

Demonstrable track record of growth (including 

acquisitions) will boost buyer confidence 

Time to demonstrate organic growth 

Scale drives higher value and multiples 

Acquisition drive EBITDA growth as synergy / 

costs reductions are easy to access - this plays 

into the infrastructure put in place in the business 

and generates a financial return from this cost 

Motivation of management 

Recent transactions and subsequent work make 

the business clean for an acquirer 

Level of dormant assets offers opportunities for 

an acquirer to activate fee income 

Lack of positive EBITDA will depress value 

Investment in systems and infrastructure for 

growth may not yield a full level of return 

Management will likely be demotivated as 

acquirer is likely to cut cost base and subsume 

Wren into its own business 

Limited cross-sell to retail plus clients 

Smaller acquisitions may not move the dial 

sufficiently to balance the risk of time (internal 

and external factors) 

Value increase will be influenced by level of 

ongoing investment 

Challenge is the relatively slow increase in value 

driven by small acquisitions and low organic 

growth vs the risk of a longer hold period 

Requires cost effective acquisitions 

Also requires investor support 

Risk of integrating acquisitions exists 

Future market risk exists 

More limited number of buyers who will be able to 

afford the acquisition 

Acquisitions do not have sufficient scale to move 

the dial as yet 

Also some unknowns around future buyer 

landscape and market 

Reduce costs to boost EBITDA albeit this may 

limit future prospects business if a sale does not 

complete. 

Build locked-in list of acquisition targets to 

provide future increase in value 

Find low cost acquisitions possible books rather 

than businesses Integrate acquisitions to access 

synergies 

Demonstrate organic growth to give buyer 

confidence 

Value enhancement potential exists in this option 

if suitable targets can be found such as Origen. 

Ongoing investor requirement could be services 

by a new investor through a secondary MBO 

Find acquirer who either needs clients and will 

use this as a means of client acquisition e.g. 

Money Farm 

Scale and platform could be attractive to new UK 

market entrant, possibly European business such 

as Primonial or GVC Gaesco who could see 

platform premium value 


16

06 

Strategic buyers & 

investors

Prospective buyers 

Wren Sterling will be attractive to a diverse group of strategic and financial investors 

Key: 

CWI contact 


18

Private equity investors 

Investment from other Private Equity houses would drive the business forward 

Key 

1. Buy and build 

2. Recent FS investments 

3. Available funds 

4. Recent activity levels 

Fund name 

Investment range 

Fund 

size 

FS investments 

£10m to £30m £200m 

£50m to £250m EVs n.a. Payzone 

Up to £100m 

n.a. 

Bluestone 

Equiom 

£10m to £60m £330m 

€20m to €50m €438m Optionis 

n.a. £120m 

Capitalflow 

Cashflows 

1 st Stop Group 

Freedom Finance 

Shawbrook Bank 

Validis 

Spring 

£10m to £40m in 

£20m to 

£100m EVs 

n.a. 

£10m to £120m £395m 


19

07 

Conclusion

Our key messages 

We understand Wren Sterling’s market and are the right partners to advise you 

going forward 

• Fundamental shifts in market dynamics caused by 

technological and regulatory developments 

• A buoyant market with high levels of deal in a highly 

fragmented sector 

• Profitability margins, scale and type of permissions 

over managed assets are high influencing factors 

towards valuation 

Market 

Valuation 

Options 

Buyers 

• We believe that the three options to consider are: 

starting a process now, continue growth plan or 

engage in aggressive growth plan before disposal 

• There is a wide pool of buyers for Wren Sterling 

including financial advisors, asset managers, 

international players and insurance companies. 


21

AAppendix: 

Clearwater 

International

Clearwater International 

Global M&A adviser with specialised sector focus 

Our Deals 

• Mid cap. 

• Over 100 per year. 

• €20 to €250m enterprise value. 

• Over €5.0 billion of capital raised per annum. 

Our DNA 

• Partner led and independent. 

• Experienced teams. 

• Sector focused. 

• International reach. 


23


We are a leading independent, international corporate finance house with sector 

specific knowledge 

Informed 

• International, senior, experienced team, highly motivated by the 

project. 

• Research led, deep industry knowledge. 

• Dedicated sector teams, with extensive experience in nine sectors. 

• Excellent PE coverage, both for buy-side and sell-side mandates. 

• A debt financing practice with strong debt coverage (senior 

banks, mezzanine funds, private debt funds). 

• Regular contacts with major industry players and in-depth 

knowledge of their development strategy. 

Independent 

• Independenceis our mantra. 

• Conflict free advisory services. 

• A “boutique” tailor-made approach, bespoke methods and processes. 

• Strong deal origination culture. 

Integrated 

• Leading mid-market position in each geography, with 

experienced local execution team. 

• Nine integrated sector teams. 

• Cross border private equity & debt advisory teams. 

Globally connected 

• Strong European base. 

• Efficient network in Asia allowing access to international investors. 

• Strong track-record in “cross-border” transactions. 

• International team of over 200 professionals. 

• We have longstanding relationships with M&A firms around the 

globe; including the US, Japan, and India. 


24


Strong coverage across Europe and Asia with partners in the US 

Offices in 15 locations across Europe and China 

San 

Francisco 

Detroit 

Chicago 

Tampa 

Boston 

New York 

UK & Ireland 

(5)* 

Paris 

Porto 

Lisbon 

Milan 

Barcelona 

Madrid 

Aarhus 

Copenhagen 

Frankfurt 

Beijing 

Shanghai 

Tokyo 

Mumbai 

Clearwater International offices 

H1 2016 World wide rankings 

KPMG 

Rothschilds 

PWC 

Lazard 

Deloitte 

EY 

BNP Paribas SA 

BDO 

IMAP 

JP Morgan 

Baker Tily International/KBS… 

RSM Corporate Finance/M&A… 

Clairfield International 

UniCredit/Credit Suisse/Lincoln… 

N+1 


Barclays/Natixis/Bank of… 

DC Advisory/Goldman Sachs & Co 

Morgan Stanley/Globalscope/CFI 

Credit Agricole CIB 

USB/Kon SpA 

75 

67 

63 

57 

52 

50 

42 

37 

36 

35 

33 

30 

29 

27 

27 

26 

25 

24 

22 

136 

122 

Partner office 

Dublin 

Birmingham 

Manchester 

Nottingham 

London 


25

Notes 


26

C L E A R W A T E R I N T E R N A T I O N A L . C O M 

CHINA • DENMARK • FRANCE • GERMANY • IRELAND • PORTUGAL • SPAIN • UK • US

Wren Sterling Pitch Document

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