Brooks Macdonald’s acquisition of Cornelian

A significant step forward in our medium-term strategyto deliver sustainable, value-enhancing growth

November 22 2019

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Through delivery of its strategy, BM now has foundations in place to support future growth, including the platform for successful acquisitions2

Also announced an equity placing to institutional shareholders to raise gross proceeds of approximately £30m to fund the cash element of the consideration 4

Announced the acquisition of Cornelian Asset Managers Group Ltd (Cornelian) – an Edinburgh based independent, well-established wealth manager with national distribution reach and track record of profitable growth – for up to £39m

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Compelling strategic fit bringing scale, cost synergies and growth opportunities; high quality business; deal value-adding through strong accretion in underlying EPS3

A significant step forward in our medium-term strategy to deliver sustainable, value-enhancing growth

Today

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• Founded 1991, listed on AIM in 2005 with <£500m FUM

• New leadership: Caroline Connellan appointed CEO in April 2017, Ben Thorpe joined as Group Finance Director in August 2018

• Ongoing growth: delivered by leveraging strengths, working with IFAs outsourcing investment management –FUM £13.3bn as at 30 September 2019 (excluding Cornelian)

• Foundations reinforced including stronger senior management team and upgrade of risk management and operating framework.

• Now focused wealth management business: discretionary fund management and financial advice through UKIM, International and FP

• Clear on strategy with targeted investment – capturing the growth opportunities, improving margins over the medium term, while maintaining relentless focus on clients and advisers

• Well positioned for the future despite macroeconomic and political uncertainty, fundamental opportunity remains significant with positive underlying trends

BM is a successful wealth management business, well positioned for the future

Having strengthened the senior team and upgraded the risk management and operational framework, BM is well positioned to undertake high quality acquisitions alongside continuing focus on organic growth

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• Simplified and de-risked Group, focused on core offering

• Strengthened leadership team

• Launched People Strategy

• Cost discipline, structured change approach

• Centralised Investment Process

• Upgraded risk management and operational framework

Reinforce foundations and take immediate actions to improve margin

Increase value by enhancing what we do and how we do it

• Maintaining focus on clients and advisers– Proposition upgrade and building go-

forward pipeline– Expanded geographic coverage – Cross-business collaboration & referrals

• Continued drive for efficiency and effectiveness, easier to do business with

– Streamline processes– Ongoing cost discipline

• Targeted investment– Attract and retain talent, build

capability– Leverage digital, new portal now live

• Working to bring legacy matters to a conclusion

• Maximise growth opportunity within our risk appetite

– Organic and inorganic

• Leverage robust operating model

• Deliver increasing value to shareholders

Improved returns from sustainable and scalable business model

Phase one: Sept 2017 – Sept 2018

Phase two: Sept 2018 for ~2 years

Strategy well progressed with stronger platform now in place, delivery of record FUM and improving profit margin in FY19

Strategy agreed in 2017, being executed over three phases

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Cornelian is a strong match to BM’s stated acquisition criteria

Criteria for acquisition Cornelian fit

High quality business

• Well managed business with excellent reputation, strong focus on clients and intermediaries, and depth of talent

• Track record of delivering growth with fund FUM increasing fivefold in five years, driven by strength of intermediary distribution reach

• Well established Direct Client book

Compelling strategic and cultural fit

• Highly complementary business with similar culture, investment philosophy and business model

• Cornelian’s multi-asset fund offering and intermediary network are a strong addition to BM’s intermediary business

• Direct business builds scale, giving opportunity to create Direct Clients centre of excellence in BM Scotland Office

Value-adding through strong accretion in underlying EPS

• Increases BM’s pro forma FUM by c.10% to £14.7bn• High degree of confidence in delivery and timing of cost synergies• Accretive in underlying1 EPS2 in first year and by an estimated 9% in

first full year in the Group (year ending 30 June 2021)• Estimated P/E multiple of 14x pre-synergies and 7x post-synergies on

a pro forma, fully phased synergies basis• Additional expected revenue synergies bringing meaningful potential

medium- and longer-term growth opportunities for the Group

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1 Underlying figures represent the results for the Group’s continuing activities and exclude: amortisation and impairment of intangibles including goodwill; changes in fair value; restructuring charges; one-off transaction costs; and other exceptional items. A full reconciliation is given in interim and final results

2 EPS accretion depends in part on price of the Placing

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Cornelian is a high quality business, with a track record of delivering growth…

• Founded in 1992 as the private client subsidiary of Noble Group, the Edinburgh based investment bank

• Independent multi-asset investment manager with £1.4bn1 FUM, managed solely on a discretionary basis

• Growth in total FUM of c.£0.75bn2 since 2014, driven principally by multi-asset funds through intermediaries; modest net outflows in FY19 in line with sector

• Investment offering includes both two successful ranges of multi-asset OEIC funds and segregated portfolios

• Operates a centralised investment team, with distribution and servicing sides run in two segments:

– Direct Client business: c.£0.5bn1 FUM from c.4501 private clients, charities and pension funds, where there is a direct client relationship

– Intermediated business: c.£0.9bn1 FUM with c.5001 supporting financial advisers

• Strong team of investment managers and relationship managers

• Generated revenue of c.£10.3m2 and an EBITDA of c.£3.4m2 in the year to 30 September 2019

29%

9%62%

Cornelian FUM by client type

Direct Private Clients

Direct Charities & Pensions

Intermediated Clients

Total FUM £1.4bn

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1 As of 30 September 2019, based on unaudited Cornelian management accounts2 Based on unaudited Cornelian management accounts

£0.9bn

£0.4bn

£0.1bn

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… and a compelling strategic and cultural fit

Independent, well-established and profitable wealth manager based in Edinburgh with national distribution reach and track record of profitable growth

Strong client and intermediary focus

Two ranges of multi-asset OEIC funds with track record of profitable growth and deep penetration in financial adviser channel

High quality established book -principally private clients but also small books of charity and pension fund business

Strong centralised investment process

Team of highly experienced and talented investment managers and relationship managers

Cornelian Strategic fit

Highly complementary – brings additional multi-asset capability and intermediary distribution reach into the Group, increases BM pro forma FUM by c.10% to £14.7bn

Matches BM’s Guiding Principles

Brings proven product and further distribution reach – a strong addition to the Group’s overall offering. AddingCornelian’s fund range will bring new opportunities

Alongside BM Edinburgh’s direct client business, builds scale and creates a Direct Clients centre of excellence, opportunity to further develop BM offering

Well aligned to BM investment process and philosophy

Further strengthens BM’s existing talent pool

Business model

Culture

Intermediary offering

Direct clients

Investment process

People

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Cost synergies and approach to integration drive strong value creation

Confidence in achieving strong value creation

• Estimated 9% enhancement to BM’s underlying1 earnings per share in the first full year following completion, taking only expected cost synergies into account

• Estimated pre-synergy P/E multiple of 14 times and a post-synergy P/E multiple of 7 times, on a pro forma fully phased synergies basis

Additional revenue synergy potential from complementary product offering and intermediary relationships, bringing meaningful medium- and longer-term growth opportunities

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• Total annualised cost savings of c.£3.75m, one-off costs to achieve these synergies of up to £1.5m

• High degree of confidence in delivery and timing of cost synergies– Detailed analysis of synergies through due diligence, tested

against judgement of Cornelian senior management– Savings confirmed at an individual contract level for non-

staff costs

• All cost synergies expected to be realised by the end of the first full financial year following completion (12 months ending 30 June 2021), the majority within the first 6-9 months of ownership

• Cornelian’s team moving to BM’s Edinburgh office, business moving on to the Group’s processes and systems, with limited need for incremental middle and back office headcount across enlarged Group

Underlying EPS accretion driven by cost synergies and approach to integration

1 Underlying figures represent the results for the Group’s continuing activities and exclude: amortisation and impairment of intangibles including goodwill; changes in fair value; restructuring charges; one-off transaction costs; and other exceptional items. A full reconciliation is given in interim and final results

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Key transaction terms involve mix of cash and shares

• Total net consideration of up to £39m, of which:– Up to £37.4m for intangible net assets, including goodwill– £1.6m for required regulatory capital of Cornelian at completion

• Represents an estimated pre-synergy P/E multiple of 14 times and post-synergy P/E multiple of 7 times, on a pro forma fully phased synergies basis

• Consideration for intangible assets, including goodwill, comprises:– Initial consideration of £29.4m payable on completion:

• £20.4m cash• £9m of newly issued BM shares (locked up for 2 years from completion)

– Contingent consideration of up to £8m, payable entirely in cash by second anniversary of completion:• £6m conditional upon meeting certain pre-determined FUM targets• £2m conditional upon meeting pre-determined synergy targets

• Cash elements of initial and contingent consideration funded by a £30m equity placing announced this morning

• Gross consideration also includes a payment for the tangible net assets of Cornelian at completion, over and above the required regulatory capital of £1.6m, capped at £7.5m (including the £1.6m), with any surplus to be distributed to the sellers between exchange and completion

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Brooks Macdonald’s acquisition of Cornelian…

• BM’s strengthened leadership team and upgraded risk management and operational framework give the platform to undertake acquisitions, in addition to ongoing focus on organic growth through intermediary relationships

• Cornelian represents an attractive acquisition opportunity with compelling strategic and cultural fit and strong financial metrics

• Complementary cultures, investment philosophies and business models

• Augments existing proposition – strengthening the Group’s intermediary distribution reach, adding proven multi-asset funds, and building scale in Direct Client offering

• Combination brings benefits for clients and intermediaries, supporting both businesses’ commitment to the highest standards of service

• Financial attributes of the deal are attractive, with strong EPS enhancement expected

… a significant step forward in our medium-term strategy to deliver sustainable, value-enhancing growth

Appendix– Cornelian

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Cornelian history

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Cornelian financial results FY2017-19

£m FY2017 FY2018 FY2019

AUM 1,270.0 1,423.0 1,380.5

Revenue 8.3 10.4 10.3

EBITDA 2.6 3.5 3.4

PBT 2.4 3.4 3.4

Figures from audited accounts for FY2017 and FY2018, and unaudited management accounts for FY2019 and AUM source data at 30 September 2019.Note: FY2019 profitability (EBITDA and PBT) was adversely impacted by a number of small non-recurring items totalling £0.2m.

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IMPORTANT: You must read the following before continuing. The following applies to the materials contained in this presentation, and you are therefore advised to read this carefully before reading, accessing or making any other use of the presentation materials. By being in receipt of this presentation, you will be deemed to have: (a) agreed to be bound by all of the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access; and (b) acknowledged that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of this presentation.

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Neither the information contained in the Presentation nor any further information made available by, or on behalf of, the Company, Peel Hunt, Rothschild & Co or any of their affiliates, or any of their respective directors, officers, partners, employees, agents, or advisers (collectively, "Representatives"), relating to the Group will form (and should not therefore be relied upon as forming) the basis of any contract and does not constitute an offer, invitation, inducement or recommendation for the taking of any action, the acquisition of any asset of, or shares in, the Company, or the making of any investment, commercial or financial decision. Each recipient of the Presentation should make its own independent investigation and assessment of the merits or otherwise of the Company, the Presentation and the Transaction and should take its own independent professional advice.

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The distribution of this presentation and the offering or sale of securities in certain jurisdictions may be restricted by law and therefore recipients should inform themselves about, and observe any applicable legal or regulatory requirements in relation to, the distribution or possession of this presentation. Neither the Company, Peel Hunt, Rothschild & Co or their affiliates accept any liability to any person in relation to the distribution or possession of this presentation in any jurisdiction. This presentation is not directed or intended for distribution to, or use by, any person or entity that is a citizen or resident located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the law or regulation of that jurisdiction or which would require any registration or licensing within such jurisdiction. In particular, these materials are not intended for general distribution in the United States under the United States Securities Act of 1933, as amended (the “Securities Act”).

The Placing Shares have not been, and will not be, registered under the Securities Act, or the securities laws of any state or other jurisdiction of the United States and such securities may not be offered, sold, pledged or otherwise transferred directly or indirectly in or into the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Placing Shares are being offered and sold only (i) outside of the United States in offshore transactions in reliance in Regulation S under the Securities Act and otherwise in accordance with applicable laws and (ii) in the United States to a limited number of “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) in transactions exempt from registration under the Securities Act. There will be no public offering of the Placing Shares in the United States.

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