Deal in Focus: Bridgepoint’s swift Quilter Cheviot tenure reaps 3.1x

In October, Bridgepoint exited UK private wealth manager Quilter Cheviot to Old Mutual in a £585m trade sale. As the deal was announced, the GP was also in the process of fundraising for its €3.5bn fifth vehicle, having announced its €2bn first close a few days earlier.

Notably, Quilter Cheviot was the latest in a series of strong exits for the GP as it prepared to announce its new fund. In August, Bridgepoint reported 2.1x returns on the £72m sale of The Energy Solutions Group; the previous month it reaped 2.6x on the $370m sale of high-tech semiconductor business SPTS Technologies Group.

Though Bridgepoint ultimately made 3.1x returns and IRR of 55% on Quilter Cheviot, the two-and-a-half-year holding period is arguably the most striking feature of the deal – particularly in an environment where holding periods typically average five or six years.

Bridgepoint acquired Quilter & Co in January 2012 from Morgan Stanley Smith Barney for £170m. The transaction was led by partner Michael Black, following his previous involvement in the 2006 sale of asset manager Tilney & Co to Deutsche Bank; a £350m deal that reportedly generated 3x returns. Alongside Black, Bridgepoint director Emma Watford and partner Stephen Green were also involved in the Quilter acquisition.

The GP had been actively looking to invest in the growing UK asset management market; specifically targeting the discretionary wealth management segment, which it saw as both underpenetrated and underserved. It pinpointed Quilter as an ideal platform investment with which to make strategic acquisitions and ultimately build assets under management.

Acquisition arsenal
The second plot on Bridgepoint's Quilter timeline was the securing of a new debt arrangement for the company. Just three months into the GP's stewardship, Quilter received a £67.5m senior debt package arranged by GE Capital, HSBC, Investec and RBS. The debt increased the business's leverage to 40% and provided an arsenal for its acquisitive growth strategy.

In November 2012, the strategy clicked into gear as Quilter acquired Cheviot Asset Management for £95m in an off-market transaction. Cheviot was viewed as being culturally compatible with Quilter; the target company's products and geographic make-up tied in with the acquirer's growth plans. Furthermore the merger of the two brands elevated the company into a top-three competitor and boosted Quilter's assets under management by 50% overnight.

Bridgepoint's penultimate manoeuvre took place in 2013 when the recently merged Quilter Cheviot underwent a refinancing deal. This allowed the business to repay bridging finance provided by Bridgepoint's fourth fund in order to facilitate the Cheviot acquisition. The company was subsequently re-rated and, having increased assets under management from an initial £7.6bn in 2012 to £16bn, had thus prepared itself to welcome potential suitors.

Speed demon
Just two-and-a-half years after its initial investment, reports emerged this summer suggesting Bridgepoint was actively exploring an IPO for Quilter Cheviot. Meanwhile, it is understood the company had also been attracting interest from various prospective trade buyers. With global equity markets once again on shaky ground, Bridgepoint appeared to view the latter of the two options as the more secure exit route.

One business, FTSE-100-listed financial services group Old Mutual, had worked its way to the front of the queue. Though an initial overture from the trade buyer was reportedly rejected on the basis that it undervalued the business, the two parties soon reached an agreement and a deal was announced in October.

Though new vehicle Bridgepoint Europe V is yet to reach its €3.5bn target, it is understood to be on course to hit its €4bn hard-cap by the end of 2014. Portfolio companies such as Quilter Cheviot, which adhere to clearly structured growth strategies and deliver strong returns, will send out alluring signals to would-be LPs.

Advisers
Vendor – Evercore (Corporate finance); Linklaters (Legal).
Management – Shearman & Sterling (Legal).

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• Topics
• UK / Ireland
• Exits
• Deal in focus
• Bridgepoint