Liontrust in talks to buy Swiss rival GAM

UK boutique fund manager Liontrust is holding takeover talks with troubled Swiss rival GAM, highlighting the pressure facing smaller asset managers to bulk up.

Liontrust, which has £33.8bn in assets under management, said on Tuesday it was negotiating with GAM after making an approach to the board. Terms of a potential deal were not disclosed.

GAM has been racing to find a buyer after twice delaying its results, the Financial Times reported last month. It has failed to recover from a 2018 scandal over its holdings of private debt, which led to fines, the exit of its chief executive and a collapse in its market value.

Its share price has plunged 96 per cent since the start of 2018. Last year the group hired UBS to help sell the business.

The travails of GAM have come during a period of intense pressure on smaller asset managers, as the expansion of passive investment hits fees and costs rise. Several have turned to consolidation to increase scale, secure growth and tap into new markets and distribution channels.

But sceptics highlight that asset management deals are often tricky to pull off because of the challenge of integrating different cultures, structures and back office systems.

Historically, Liontrust has been aimed at retail investors. Under chief executive John Ions, the group has already done several deals, including the acquisition of Majedie Asset Management in 2021, the purchase of the UK investment business of Architas in 2020, Neptune Investment Management in 2019, and Alliance Trust Investments in 2017.

David McCann, analyst at Numis Securities, cautioned that shareholders should treat any tie-up between Liontrust and GAM with “scepticism”. “We would assume that cost-cutting/synergies would be a major part of the rationale, given that GAM remains meaningfully lossmaking with its current cost base,” he said. 

McCann added that recent Liontrust acquisitions — notably Majedie and Architas — “have not been great from a shareholder value perspective”. 

Liontrust’s approach for GAM follows a striking fall from grace for the Swiss group. Once one of Europe’s biggest asset managers, GAM’s troubles began in July 2018 when it suspended former star fund manager Tim Haywood with little explanation, prompting investors in its Absolute Return Bond funds, which Haywood managed, to rush for the exit.

It later transpired that Haywood had bought bonds relating to Lex Greensill’s now collapsed supply chain finance business Greensill Capital, which counted former UK prime minister David Cameron as an adviser.

Insiders at Zurich-based GAM had voiced concerns about Haywood’s relationship with Australian financier Greensill, which ultimately led to the liquidation of the funds. Chief executive Alexander Friedman stepped down while Haywood was subsequently fired. In 2021 GAM was fined £9.1mn by the UK’s Financial Conduct Authority for conflicts of interest.

The current chief executive, Peter Sanderson, joined at the end of 2019 and has tried to cut costs. GAM said in January that the board was “constantly reviewing the progress of the firm to ensure that our strategy is appropriate” and that results would be delayed to allow time to provide shareholders with an update on its strategy.

Talks between Liontrust and GAM were first reported by Sky News.