Combining the purchase of Rockspring Property Investment Managers with that of Triuva and Sparinvest, fund manager Patrizia now has more than €40bn (£35.6bn) under management, doubling its size in just four months.
Anne Kavanagh, chief investment officer at Patrizia, says “never say never” on new acquisitions, but that the plan now is to consolidate existing ones.
“One of the things about M&A activity we know is the success is in the integration, our current focus is to make sure we integrate well and quickly,” she says.
“I am not saying we would not do any further acquisitions – and we have a very strong balance sheet – but at the moment our focus is consolidating what we have got.”
The Rockspring deal, she says, works fundamentally well with Patrizia in that there is very little overlap between the two fund managers.
While Patrizia has a solid footing in the German-speaking world, Rockspring has a larger presence in the UK and international markets.
Kavanagh says this will particularly apply to looking at new pools of investors. It will also give Patrizia a London hub.
Patrizia has 600 employees on the continent and 15 in London, while Rockspring has 110 employees in London and 10 in Europe.
“The fundamental thing was there is not any overlap between their business and ours,” says Kavanagh.
“We have been looking at the markets we want to expand and to deepen our strength and breadth in. The UK was one, France is one, through this acquisition we are able to meet a lot of our objectives.”
Rockspring’s AUM is split between the UK and Ireland (35%), Germany (34%), and France (13%).
Since it was set up in 1984 by current non-executive chairman Richard Plummer, Rockspring has amassed gross assets of €7.9bn in funds under management and available debt. It has around 120 institutional investor clients across 20 countries, with around 80% of those being pension funds.
Kavanagh says this will mean no redundancies, with the current management team, including chief executive Robin Gilchrist, staying on.
According to Gilchrist, he will become part of the extended Patrizia board and have a role at the wider company, while Edmund Craston, currently managing director, will take over the day-to-day running of Rockspring’s operations.
Gilchrist says that Rockspring had been looking to do a deal and Patrizia was a good fit.
“Earlier this year, a number of factors combined to make us realise it was the right time to start considering our future and prepare Rockspring for the next phase of its growth,” he says.
“We also felt this was the right time to run a highly controlled process to find the right strategic partner for our group.
“The markets are benign, there is a lot of interest in the sector… this was a good time to fulfil that type of strategy rather than perhaps at a later stage in the cycle, when that might be more challenging to find or agree something with the right kind of person.”
Kavanagh says one of the key parts of the deal was bringing the people on board. “Most people are looking for deep expertise in real estate markets. One of our stated missions is to be the preferred employer for the best talent in the European real estate industry,” she says.
Rockspring’s existing vehicles will continue and Kavanagh says there will be no merging of funds.
However, the intention will be to offer new funds going forwards with their combined expertise.
Current Rockspring vehicles include Rockspring Hanover Property Unit Trust, Rockspring PanEuropean Property Limited Partnership, Rockspring TransEuropean IV, V and VI, the Rockspring German Retail Box Fund, Rockspring UK Value Funds 1 and 2, and single client mandates.
Gilchrist says: “Patrizia has a true desire to be a global player in the European market place and we offer a global perspective on the European marketplace for discretionary capital, so we provide a missing piece in that jigsaw.”
Patrizia is not the only manager to be expanding at the moment. There has been a wave of consolidation across the sector, as clients demand more from managers and margins dwindle, while technological and regulatory outlay becomes more and more expensive.
Gilchrist says the industry is evolving quickly, with the smaller boutiques on the one side, which have their place but are unable to scale.
“Then there are the businesses that are becoming ever larger at the other end – either because they have the skills that attract capital… or they have material amounts of in house capital… it makes the middle ground ever more challenging,” he says.
In the UK, Aberdeen and Standard Life are the most high profile, as various operators look to be able to compete with BlackRock and Blackstone. Earlier this month, Principal Capital Investors bought Internos for a European foothold.
“One of the challenges we have in the investment world is regulation putting a lot of requirements and demands on a business that can be relatively expensive for a platform. To meet your client’s needs and run an efficient business, you need to be either tiny or to have scale,” says Kavanagh.
But critically, she points out, it is being able to offer clients what they want: “The really big thing is being able to meet client and investor needs.
“Broadly, that is about being able to offer a strong product base for clients, and also strength and depth in the markets… it is being able to offer a better service.”
Inside Rockspring
- Founded in 1984 by Richard Plummer, currently non-executive chairman.
- Independent and 100% owned by its senior management and employees.
- HQ in London with offices in Amsterdam, Berlin, Brussels, Madrid, Paris and Warsaw.
- The executive committee includes chief executive Robert Gilchrist, managing director Edmund Craston and finance partner Ian Baker.
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