Tatton Asset Management plc expands MPS business with 8AM acquisition (LON:TAM)

Tatton Asset Management

Tatton Asset Management plc (LON:TAM), the investment management and IFA support services group, confirmed in August 2022 that, further to the announcement of the 20 April 2022, the Group completed the acquisition of 50% of the share capital of 8AM Global Limited (“8AM”), having received regulatory approval. As previously announced TAM has agreed to acquire 50% of the issued share capital of 8AM Global Limited for a total consideration of £7.0 million, with an option to acquire a further 50% in due course.

THE ACQUISITION 8AM is an investment manager primarily focussed on delivering risk-profiled model portfolios and a small range of multi-manager funds. Their model portfolios and funds will complement TAM’s existing proposition, further demonstrating our commitment to supporting financial advisers in delivering low-cost investment management and enhancing IFA client outcomes. The proposed acquisition will provide our IFAs’ clients access to an extended range of risk profiled investments utilising 8AM’s experience, investment style and approach. Post completion 8AM’s AUM is expected to be at least £0.8 billion and it is anticipated to generate adjusted operating profit of £0.7m in its first full year of ownership. 

ISSUE OF SHARES As outlined in the announcement dated 20 April 2022, 50% of the Consideration is payable through the issue of shares in Tatton. The share consideration will be satisfied by the issue of new 877,737 ordinary shares of £0.20 each (“Ordinary Shares”)(the “Consideration Shares”). The Consideration Shares will be issued at a price of £3.9891, representing a 5% discount to the average volume weighted average share price for the five days ended 11 August 2022, which was the last practicable date prior to Completion. 

TOTAL VOTING RIGHTS The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares in issue at the time such shares are issued. Application has been made for the newly issued shares to be admitted to trading on AIM, and admission is expected to take place on 17 August 2022 (“Admission”). Following Admission, the Company’s issued share capital will consist of 59,842,624 ordinary shares. There are no ordinary shares held in treasury. Therefore, following Admission, this figure of 59,842,624 should be used by shareholders as the denominator for the calculation by which they determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules. 

Commenting on the Proposed Acquisition, Paul Hogarth, Chief Executive Officer, said: 

“I am delighted to announce the completion of the acquisition of 50% of the share capital of 8AM Global Limited, an ambitious and growing DFM MPS business. The business complements TAM’s existing core MPS offering which has continued to see strong net inflows over the first four months of this financial year. 8AM brings with it an experienced and motivated management team who are well known to us and culturally aligned to the values of the Group. We are very much looking forward to working with them.

In June 2022, with the publication of Tatton Asset Management’s Annual Report and Accounts 2022, CEO Paul Hogarth set out his strategic goals and priorities for Tatton:

“As we look forward to FY23, our strategic emphasis will be to consolidate and build on the gains we have made to date and further develop the business to drive growth and long-term value creation. Specifically, we look to achieve the following: 

— Continue with the strong organic growth of new net inflows, utilising our increasing range of firm distribution platforms: Paradigm, Tatton, Tenet and Fintel; 

— Deliver the next phase of our three-year “Roadmap to Growth” strategy, taking us from £9.0bn in FY21 to £15.0bn by FY24. Building on the strong performance in FY22, where we delivered £1.65bn through organic growth and £0.65bn through acquisition, we need to add a minimum of £1.7bn in FY23 to remain on track; 

— Launch our new range of “ETHOS” Ethical funds in 2022 in response to demand from the IFA community; 

— Identify and execute on further acquisitions that contribute to the “Roadmap to Growth” strategy but also, importantly, fulfil our basic criteria of being complementary and earnings enhancing; 

— Build on our recent success by delivering further strategic partnerships, joint ventures and collaborations with larger IFA firms delivering enhanced client outcomes; and 

— Continue to grow the number of firms utilising Paradigm, specifically taking a greater share of the available mortgage broker and intermediary market, and growing the level of mortgage completions.”

Prior to the tie-up with 8AM, Paul set out how Platforms and Managed Portfolio Services (“MPS”) Client outcomes remain and will always be its key focus. Paul stated in the Annual Report, “This was the “raison d’être” for the creation of Tatton back in 2013 and remains at the heart of our DNA as a business. Since inception, we have built a strong track record of delivering value and consistent investment returns at a market leading cost, utilising MPS while operating exclusively on Retail Investment Platforms (“Platforms”). 

As the use of Platforms by IFAs continues to increase, with over £680bn of assets now held on Platforms, we continue to see increased demand for MPS. The combination of utilising both Platforms and MPS enables IFAs and their clients to bring together their chosen technology platform and investment solution under a single access point, which, in turn, is leading to an increasing share of IFA/client assets being invested utilising these solutions. 

As a result of this, the MPS market continues to mature, with the past 12 months bringing many new entrants but also seeing long-standing traditional investment managers entering the MPS market, as well as promoting their existing MPS propositions. This both helps promote and further validates the broader MPS opportunity and proposition. 

Tatton Asset Management remains at the forefront of the MPS market, as the leader from a price, proposition and service delivery perspective. This has enabled us to maintain our position, with over £10bn of our total £11.3bn being MPS AUM, making us the largest provider of MPS on-platform, nearly double the MPS AUM of our nearest competitor.”

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