GAM: Niel’s pitch invasion forces Liontrust out of takeover deal

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Fund management companies and professional football clubs share a number of similarities: performance matters, the best staffers are costly and key assets can walk out of the door.

Swiss fund manager GAM has received a kicking in recent years. A tussle between former bidder Liontrust and activist investor group NewGAMe has done little to raise the game.

On Tuesday, GAM’s board agreed to step down in an upcoming extraordinary meeting. It is a victory for NewGAMe, led by French billionaire Xavier Niel, which successfully blocked a takeover attempt by UK rival Liontrust.

Niel’s consortium does not want a takeover by Liontrust. It wants control. It owns 9.6 per cent of the shares already and has offered to buy another 17.5 per cent.

On Tuesday, NewGAMe said it would provide SFr20mn of financing to keep GAM going. A proposal for a SFr25mn convertible bond proposal awaits at the EGM.

This leaves GAM in limbo. Clients will not like turmoil, no matter who runs the business.

Some stalwart GAM shareholders may hope for a better exit price. But this is unlikely to happen until assets under management reverse a long-term downward trend. Since 2017, the fund manager’s assets under management have more than halved to SFr68bn. The 2018 Greensill scandal — involving former star bond manager Tim Haywood — was the cause of most of this. But GAM’s asset spill had already begun when it hit headlines.

GAM’s management struggled under chief executive Peter Sanderson, a former BlackRock executive. Chair David Jacob would have ushered in steep cost cuts with Liontrust’s takeover — some 44 per cent of GAM’s cost base, according to Numis. That looks high compared with about 30 per cent for deals in the sector. NewGAMe’s plans for a new board, and possibly even a new CEO, will not eliminate the need for cost reduction.

GAM claims funds performance over three years has outpaced benchmarks. That will not stop more clients calling time amid the tumult.