Interactive Investor

Bob Diamond’s City raid on Panmure Gordon

17th March 2017 11:04

Graeme Evans from interactive investor

Ex-Barclays boss Bob Diamond may be grabbing the headlines today, but what's more interesting about the takeover of Panmure Gordon is why such a venerable City of London name is in the takeover spotlight in the first place.

The business, which dates back to 1876, has become the latest example of consolidation in the small and mid-cap broker sector, with Qatari major shareholder QInvest and Diamond's Atlas Merchant Capital joining forces on a proposed £15.5 million takeover deal for Panmure.

As trading conditions in the sector have become particularly punishing, a number of famous names have succumbed to such deals in recent years.

Most notably, Seymour Pierce's broking business was rescued by Cantor Fitzgerald as part of a pre-pack administration in 2013. A year later Oriel Securities was snapped up by US brokerage and investment bank Stifel Financial and Panmure acquired Charles Stanley's securities division in 2015.

There have been several structural changes that have made life tougher for firms like Panmure, which made an underlying loss of £4.1 million in 2015.

Regulation, in particular, has become extremely burdensome, with new rules on stockbroker commissions one such example. Technology has also played its part in putting pressure on fees and encouraging the rise of passive investing. Volatile trading conditions have added to the problems.

Whilst Panmure returned to profitability in 2016, directors feared that without access to additional capital the company would struggle to compete.

The London and Leeds-based firm, which had been rumoured to be pairing up with Cenkos Securities, currently acts as corporate broker or adviser to 130 UK listed companies, and provides sales and trading services to over 400 institutional investors.

As readers of this website will know, it also provides research coverage on 250 companies in a wide range of industry sectors and geographies.

In investment banking, Panmure advises companies on their corporate and financing requirements, including flotations, private placements and secondary issues, as well as M&A advice.

Panmure has also been impacted by legacy issues related to the acquisition of ThinkEquity in 2007 and its disposal in 2012, which impacted the firm's financial performance and its share price.

The testing conditions have made it difficult for the company to attract new capital. At a premium of 68% to Thursday's closing price, today's 100p a share offer at least gives shareholders the certainty of a cash exit.

Atlas and QInvest have pledged to invest additional capital and add new talent to create an investment bank with a wider array of services for its client base.

This will include augmenting Panmure's current corporate finance capabilities with proven senior M&A bankers, strengthening the equities division, and broadening the product offering to leverage.

They also want to grow its retained corporate client base, as well as ensure that a scalable infrastructure is put in place to support growth aspirations.

Panmure is no stranger to foreign ownership, having been acquired by NationsBank, now Bank of America, in 1987. It was later bought by German bank WestLB nine years later and then in 2004 by Lazard.

A year later, in 2005, Panmure reclaimed its independence and listed on AIM through the reverse takeover of small and mid-cap investment bank Durlacher.

QInvest, a leading investment bank in Qatar, has been a strategic investor in Panmure since 2009 and currently owns 43.4% of the business. To help fund growth, an unsecured £5 million funding facility was made available to Panmure Gordon in February 2016 by QInvest.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

 

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