View all newsletters
Have the short, sharp Spear's newsletter delivered to your inbox each week
  1. Wealth
March 27, 2013

Analysis: Why Schroders is Buying Cazenove Capital

By Spear's

Schroders’ acquisition of Cazenove Capital will allow the firm to expand its scale and product offering and will enhance its revenue margins, says Freddy Barker

The realpolitik of Schroders’ acquisition of Cazenove Capital, according to Peter Lenardos at RBC Capital Markets, is that operating margins at Schroders Private Bank fell from historic norms of 30 per cent to 12.5 per cent in 2012.

In a world where organic growth is tough to come by, that was the result of lack of scale, limited positioning in the UK wealth management market and lack of a full-product offering. ‘The Cazenove Capital acquisition thus brings the scale (especially in UK wealth management) and products (such as financial planning) that Schroders was lacking,’ says the diversified financials specialist.

A piercing assessment, and one that to a certain extent explains the ‘significant benefits and enhanced opportunities’ that Philip Mallinckrodt, Schroders Group Head of Private Banking, has been talking about.

Breaking down the numbers even further, Lenardos adds that it won’t hurt Schroders that revenue margins at Cazenove are 67 basis points compared to its 58 basis points. ‘Therefore, Cazenove’s focus on higher revenue margin products and channels (including wealth management, equities and retail) will enhance the revenue margin at Schroders’ overall business.’

On top of this, cost synergies of £12 million to £15 million per annum are anticipated from distribution and infrastructure as well. The latest thinking is that these will not derive from front-office activities and that they will be split equally between the private banking and asset management divisions.

Taking into account that Cazenove Capital complements Schroders’ funds business – on top of the multi-manager capability, Julie Dean will be a strong, if different, replacement for Schroders star UK equity manager Richard Buxton, who will be leaving in June to work for rival Old Mutual – the £424 million deal, therefore, looks a winner all round.

Andrew Ross will be Head of UK Private Banking following the acquistion
You can see why Andrew Ross, Cazenove Capital’s CEO, happily declared that ‘This is a very exciting development…we will create a pre-eminent independent private banking and charities business in the UK.’

Read more from Wealth Wednesday

Content from our partners
How Flygreen is ascending into the future of private aviation
Stoneweg, Icona, and CBH Strengthen Partnership with Cromwell Acquisition, Adding €4 Billion AUM to Stoneweg
Why investors should consider investing in nature

Read more from Freddy Barker

Don’t miss out on the best of Spear’s articles – sign up to the Spear’s weekly newsletter

Select and enter your email address The short, sharp email newsletter from Spear’s
  • Business owner/co-owner
  • CEO
  • COO
  • CFO
  • CTO
  • Chairperson
  • Non-Exec Director
  • Other C-Suite
  • Managing Director
  • President/Partner
  • Senior Executive/SVP or Corporate VP or equivalent
  • Director or equivalent
  • Group or Senior Manager
  • Head of Department/Function
  • Manager
  • Non-manager
  • Retired
  • Other
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
Thank you

Thanks for subscribing.

Websites in our network