Private equity-backed Towry Finance is set to take over listed wealth manager Ashcourt Rowan in a deal worth £97m.
In a joint statement, the firms said the transaction will create a major player in the UK private wealth market with assets of more than £11bn.
They said the combination has “a clear strategic and financial rationale” with a “high degree of complementarity” between the two businesses.
The firms claimed the tie-up will better serve the needs of customers.
Shares in Ashcourt Rowan surged 56 per cent on the announcement.
The sector has been shaken up by the introduction of the retail distribution review at the start of 2013, which aims to ensure advisers are better trained and that fees for financial advice are more transparent.
Ron Sandler, chairman of Towry, said: “The combination of the Towry and Ashcourt Rowan businesses will bring an exciting opportunity to create one of the largest companies in the UK private wealth management sector.
“Our highly complementary business models will deliver significant client benefits, providing access to a broader range of services and investment solutions.
“Ashcourt Rowan has developed into a high quality business following a period of reorganisation and with a strong cultural fit, the combined entity will be well positioned to take advantage of further growth opportunities as the market continues to evolve.”
Towry is owned by Palamon Capital Partners, a mid-market European private equity firm.
Hugh Ward, chairman of Ashcourt Rowan, said: “We are pleased that our recent discussions with Towry have been concluded positively and that the loyalty shown by our shareholders has been rewarded by this offer for Ashcourt Rowan.
“I believe that the combined entity will be well placed on completion to benefit from the growth dynamics of the wealth management industry over the coming years and provide an outstanding platform for key professionals in the sector.”
The transaction represents a premium of 60.2 per cent to the closing price of shares in Ashcourt Rowan on January 30, the last business day before the announcement.
The Ashcourt Rowan directors said they intend to recommend that shareholders vote in favour of the deal.
Jonathan Polin, chief executive of Ashcourt Rowan, owns 231,645 shares in the business, which manages or has under influence more than £5bn of assets. It acquired Leeds-based UK Wealth Management in 2013 and has an office in the city.
Towry manages or advises on more than £6bn in assets. It also has an office in Leeds.