Business

Sandaire sale presages a bleak period for multi-family offices

After offering a safe haven to five generations, the Scott family is selling Sandaire, its multi-family office business, to asset manager and family-owned Schroders.

The news marks the end of an era. But it also follows operating losses at Sandaire and a drop in the value of its client business. 

Further consolidation among multi-family offices is on the cards, as they strive to match the investment solutions during a period of intense market uncertainty caused by Covid-19. MFOs have always bridged an awkward gap between serving families and marketing services on a relatively low capital base, leaving them vulnerable to adverse events. 

The Sandaire deal also coincides with consolidation elsewhere in the wealth sector, where long-established family-owned advisers have been snapped up by stronger rivals to comply with tougher regulation and costs. 

The Scott family fortune was made at Provincial Insurance, started by Sir James Scott in 1903 and latterly advised by legendary economist John Maynard Keynes.

In 1996, following the sale of Provincial, the Scott family ploughed their gains into Sandaire, named after the family’s Lake District head office. 

Under Alex Scott, Sandaire became the UK’s first multi-family office, absorbing its rival, Lord North Street in 2014.  Alex Scott’s brother Sir Christopher also serves on its board. A fifth-generation Scott – Oliver Sargent – became a director last year.

Schroders is buying Sandaire for an undisclosed sum, and Alex Scott has agreed to chair its global family services division. The business will go under the wing of Schroders’ up-market business Cazenove Capital Management. Alex Scott will remain chairman of Wheatsheaf Group, the tech-driven agricultural business backed by the Grosevenor Estate, where he is a trustee: his connections in the family business world, particularly in the UK, are impressive. 

Cazenove chief executive Mary-Ann Daly said: “We have huge respect for Alex Scott’s role in pioneering the family office model in the UK. We are delighted that Sandaire feel they can entrust us to best serve their clients’ interests going forward.”

Sandaire has retained a sound professional reputation throughout its existence. But it suffered the defection of a senior Lord North team in 2016 and parted company with a chief executive Alexandra Altinger soon after: she is now chief executive at JO Hambro Capital Management. 

The defection of the Lord North team led to a write down in Lord North’s balance sheet value of £8.7 million, against a 2014 purchase price of £20.4 million. 

From £2.65bn under management at the start of 2018 Sandaire’s assets have fallen to today’s £2.2 billion. Its operating losses, before goodwill amortisation in the 2018 calendar year were £2.05 million, following a loss of £1.17 million in 2017, according to the latest accounts filed by holding company, Applerigg, at Companies House. Turnover fell 12.5% to £12.2 million but expenses only dropped 5.5% to £14.3 million. 

After knocking off goodwill, the 2018 operating loss was £3.47 million against a loss of £4.91 million the previous year. Sandaire’s business in Singapore lost £692,000, although Yealand Group, an administration group, delivered profits of £1.10 million. 

In challenging circumstances, Sandaire has been successful in maintaining services to clients. It developed corporate finance, real estate and private equity services in 2019.  But Covid-19 has given pause for every firm wanting to invest in growth. Sandaire was faced with the choice of battling on or seeking a safe haven. Analysts say Alex Scott made the right call.

His deal with Schroders has brought Sandaire, and its clients, financial clout and a range of expertise. As well as investment opportunities, Schroders can offer Sandaire banking services and a sophisticated administration platform. Sandaire’s clients may also be reassured that Schroders has remained 49% owned by its founding family for more than 200 years. 

In a statement Alex Scott said: “We look forward to seeing our family and clients flourish under Sandaire’s new ownership.”

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