NatWest Group PLC eyeing Tilneys as wealth management land grab continues

Tilney, Smith and Williamson is reported to be the latest wealth management firm facing a mega-money bid, with NatWest Group PLC (LSE:NWG) said to be considering an offer.

Private equity owners Permira and Warburg Pincus have put the business up for sale for a price in the region of £2.5bn-£3bn.

Tilney has more than £57bn worth of assets under its management, with sources quoted in Sky News that a sale process will get underway in the next six weeks.

One option mooted is for  Warburg Pincus to buy out Permira’s stake, although several major banks alongside NatWest are also said to be weighing up an offer.

Should any deal go through, it would be the latest in a string of acquisitions in the wealth management market.

Late last year, abrdn purchased interactive investor for £1.5bn, while just last week Royal Bank of Canada (TSX:RY) acquired Brewin Dolphin for a similar fee.

Buy-outs in the wealth management sectors are becoming a more regular occurrence, with Russ Mould, an investment director at AJ Bell, adding that “wealth management is seen as very attractive.”

“Wealth management can be a reliable, high margin, certainly relative to wildly-cyclical investment banking revenues, or fiercely competitive retail, mortgage and business lending.”

And there is money to be made, according to Barclays.

The bank ran the numbers on the deal and concluded that an acquisition by NatWest would improve profits before tax by roughly 3% in 2023, and uplift earnings per share by 4%.

However, as previously stated, a deal will not be cheap, with Barclays estimating that any transaction would hit the high-street bank’s surplus cash by anywhere between £1.1bn-£1.6bn.

“Given the importance of capital distributions to NatWest’s investment case, any potential use of capital to acquire businesses is likely to be a key sensitivity for the shares,” Barclays added.