Candover, the London-based private equity firm, has led the E182.5m management buyout of the trust and fiduciary services division of Insinger de Beaufort, the Anglo Dutch private banking and asset management group.
Candover acquired a majority stake in the business, which will be trading as Equity Trust. Insinger retains a significant minority stake, while the company’s management team have exchanged previous shareholdings in either the trust business or its banking parent for equity in Equity Trust.
Candover has agreed to pay Insinger a deferred consideration of E15m at a later point depending on Equity Trust’s performance.
Details of the financial structure of the transaction have not been disclosed. However, Charlie Green, a director at Candover, said more equity than debt capital has been used to finance the deal. Royal Bank of Scotland is arranging debt funding.
Green said Candover chose to use relatively little debt to fund the deal at this stage so as to “keep our powder dry” for future acquisitions. “We expect the sector to consolidate and intend to play a significant role in that process”, said Green, adding that overleveraging the deal on day one would not help such a strategy.
Equity Trust’s acquisitive expansion strategy was also Insinger’s principal reason for seeking an external investor for the business, which it established in 1986. Peter Woodthorpe, Equity Trust's chief executive, commented that making acquisitions would have been difficult for the bank under capital adequacy rules forcing it to consolidate any equity investments as good will on its balance sheet. As a minority stakeholder in a business it continues to consider attractive, Insinger did not face this issue, Woodthorpe said.
Equity Trust, which provides services primarily based around the formation and ongoing administration of onshore and offshore trusts and companies, also intends to grow revenue organically. According to Green, the company has a highly attractive revenue stream based on clients paying a flat annual fee plus a time-based fee for specific services rendered. In 2002, Equity Trust’s revenue grew 10 per cent, Green said.
Insinger was advised by PricewaterhouseCoopers Corporate Finance, which held an auction in which Candover competed against rival equity sponsors Advent International and Barclays Private Equity before securing exclusivity in March this year, according to a source.
For Candover, it is the ninth investment out of its Candover 2001 Fund, which it closed in June 2002 on E2.7bn. The fund is now over 50 per cent invested.