Wednesday 25 March 2020 7:17 pm

Tilney and Smith & Williamson merger on brink after coronavirus crash

The merger between Smith & Williamson and Tilney is teetering on a precipice following the economic shock triggered by the coronavirus pandemic.

Wealth manager Tilney – which is backed by private equity firm Permira – announced in September it had agreed to acquire wealth manager and accountancy firm Smith & Williamson in a £625m deal.

Read more: Coronavirus: Could previously announced M&A deals fall over?

The deal was supposed to complete in the early part of this year, but ran into regulatory problems, with the Financial Conduct Authority reportedly concerned at the level of debt the combined business will carry.

Now the deal faces further difficulties following the economic crash triggered by coronavirus.

A source with knowledge of the deal said Tilney’s valuation had been hit hard by the fall in the dollar value of its assets under management, making a deal between the two hard to conclude.

“Tilney is more reliant on wealth management and Smith & Williamson has its accounting practice as well as wealth management so it is more diversified,” they said.

A source at Smith & Williamson said the deal was still alive, but conceded it would be further delayed.

“At the moment we are progressing, there will be delays, but we are still cracking on at this stage,” they said.

Read more: Wealth manager Tilney confirms Smith & Williamson merger talks

“We are still trying to seek regulatory approval, but the FCA have probably got more important things to focus on at the moment,” they added.

A spokesperson for Smith & Williamson said: “Both boards of Tilney and Smith & Williamson continue to believe in the strong strategic rationale for the transaction and conversations continue.

“In light of the covid-19 pandemic the immediate focus for each business is on its clients and employees during this very demanding time.”

In September when the deal was announced, the pair said the combined business would have an enterprise value of £1.8bn, with revenue of around £500m and profit of £150m.

Tilney agreed to buy out Smith & Williamson shareholders with consideration of £625m, through a combination of cash and shares in the combined group.

Read more: Tilney and Smith & Williamson strike £1.8bn wealth management and professional services deal

In 2017 Smith & Williamson held an unsuccessful round of merger talks with wealth manager Rathbones. 

Tilney launched an alternative bid, but Smith & Williamson chose instead to pursue a deal with Rathbones that ultimately collapsed.

Following the failed tie-up talks with Rathbones, Smith & Williamson publicly committed itself to a stock market listing by 2020.

Tilney declined to comment.