There’s no let up in City’s race to consolidate

 
David Hellier
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IT seems there is going to be no slackening of the consolidation process taking place in the financial advisory sector. Evolution has already been swallowed up by Investec, with fairly unpleasant consequences for many of its employees; Collins Stewart Hawkpoint is busy sorting out the finer details of its deal with the Canadian group Canaccord, and a whole raft of firms have let people go.

In current markets, there is simply not enough commission business or deals going on to support existing incumbents. The last couple of days have also brought rumours of Panmure Gordon putting together some sort of deal with Cenkos, now led by chief executive Jim Durkin. Anythings possible in these markets but yesterday there were doubts that Panmure’s Qatari shareholder would fancy selling out of the group at current prices.

Then there’s the future of Hoare Govett, the advisory arm of RBS that chancellor George Osborne has insisted must be sold. Hoare Govett, despite its recent troubles and losses estimated at around £20m a year, is still viewed in the City as a fantastically attractive brand.

The firm retains a host of brokerships in the FTSE 100, including Rexam, Morrison and Rolls-Royce, and despite the problems of its current parent and being part-owned by the government it still employs a number of high quality employees, such as Paul Nicholls, Lee Morton and Chris Zeal.

RBC Capital Markets, the Canadian banking group, is seen by many to be one of the more obvious buyers but privately it has been ruling itself out. Barclays Capital is also expanding its advisory business but maybe CIBC is a more likely bidder.

Liberum Capital, which is a well regarded independent advisory and research house, is said to be interested in picking up some of the best teams from Hoare Govett but has yet to have detailed talks with Lazard, which is working on the sale. Numis has also been named as a possible buyer.

Much depends on the financial arrangements. Hoare Govett employs around 1,000 people, many of whom would not be required by a purchaser. Indeed any buyer might even need some assistance in order to be able to make the necessary lay-offs.

The firm seen to be in pole position is Oriel Securities, which just happens to have former Hoare Govett legend Peter Meinertzhagen as a director. It would be a big step up for Oriel but chief executive Simon Bragg is an ambitious man.

david.hellier@cityam.com