The impending purchase of Sanlam’s UK wealth management division (Sanlam Wealth) by investment funds managed by Los Angeles-based Oaktree Capital Management LLP, provides further evidence of the speed at which change can take place at individual firm level, along with the growing influence of private equity firms in the sector.
It wasn’t that long ago that Sanlam was being considered as a potential vertically integrated wealth management firm encapsulating most, if not all, of the value chain.
Over the past 15 years it had made a number of acquisitions straddling the private client investment management and advisory sectors, as well as taking a majority stake in Nucleus Financial, a big investment platform, to augment its life insurance and pensions capabilities.
Its acquisitions included Sevenoaks, Kent-based Principal Investment Management; Kirkby Lonsdale, Cumbria-based Border Asset Management; Chichester, West Sussex-based Thesis Asset Management; and Cheltenham, Gloucestershire-based Tavistock Financial.
Following a strategic decision to focus on Africa and India, however, the big South African insurance firm then embarked on a rapid divestment programme that has resulted in its virtual exit from not just wealth management but the UK life and pensions sector as well.
Earlier in 2021, it offloaded its majority stake in Nucleus to James Hay for around £145 million and its life and pensions business to Chesnara, a consolidator, for £39 million.
With its UK wealth business set to go for £140 million Sanlam’s UK presence will be confined to an institutional asset management business.
Having built and then rapidly disposed of a UK-based wealth management business Sanlam’s experience has an uncanny parallel with that of Old Mutual, another South African company. This did something very similar in the late 1990s and early 2000s before coming back to repeat the trick with what is now Quilter plc.
For its part Oaktree, which has already invested in Ascot Lloyd, a consolidator of advisory firms, joins a growing number of private equity firms with UK wealth management interests such as Permira and Warburg Pincus (Tilney Smith & Williamson) and the Carlyle Group (Hawksmoor/Hurst Point).
In essence Sanlam Wealth, its latest acquisition, consists of two corporate entities: Sanlam Private Investments, which encapsulates its discretionary asset management interest; and Sanlam Wealth Planning, which focuses on advisory and planning-related activities.
Sanlam Private Investments is the larger of the two firms generating revenues and pre-tax profits of £27.9 million and £1.5 million respectively with assets under management of £4.7 billion at the end of 2020.
Sanlam Wealth Planning reported revenues of £10.8 million and a pre-tax loss of £395,000 for the year to 31 December 2020.
Assume that these two entities really do constitute Sanlam Wealth and Oaktree is effectively paying around 3.6 times its new acquisitions annual revenues.
According to the statements which accompanied news of its acquisition Oaktree considers Sanlam Wealth, which will adopt a new name and brand, to be “a strong platform for growth in a fragmented market”. It will “support management in the delivery of its innovative acquisition strategy”.
Quite what is innovative about “new” Sanlam’s acquisition strategy remains to be seen. But it seems clear that acquisitions will play an important role in the firm’s strategy going forward.
Jonathan Polin, Sanlam Wealth’s current chief executive, will continue to oversee the firm.
Mr Polin has a good record in growing firms, not least Ashcourt Rowan, a wealth management consolidator, where he was chief executive between 2011 and its sale to Towry in 2015.
Oaktree will be hoping that he can repeat this feat again, especially now that Mr Polin will be operating without the constraints imposed by a large owner with competing commercial imperatives.
