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Alvarium-Tiedemann Merger: Are Its Global Ambitions Realistic?
30 September 2021
Clearly, Michael Tiedemann is aiming big. How will clients react?
The head of the $20 billion US-based multi-family office is about to become the CEO of a new industry powerhouse, Alvarium Tiedemann Holdings, which is aiming for nothing less than being a major player in the global ultra-high net worth market.
The combination of Tiedemann Group and London-based investment manager Alvarium Investments will be competing with “large banks” in the offshore market for ultra-high net worth families, Tiedemann told Family Wealth Report.
“We will have a very competitive offer,” Tiedemann said. “We believe the non-US offices of the combined companies will be attractive to both team members and clients.”
Tiedemann already has affiliated offices in Switzerland and the UK and Alvarium has offices throughout Europe. But the newly merged companies will be making a strategic push into Asia, Tiedemann said, targeting Hong Kong and Singapore, while also exploring real estate opportunities in Australia and New Zealand.
Latin America will also be in the crosshairs of the new venture, which will become a public company via a merger with special acquisition company Cartesian Growth Corp.
Alvarium already has an RIA in Miami that serves Latin American clients. And Tiedemann, who once worked for Banco Garantia, one of Brazil’s leading investment banks before it was acquired by Credit Suisse, expects to draw on his extensive contacts in Brazil, where he lived for two years.
Tiedemann and Alvarium are expecting the merger and further expansion to pay off handsomely.
Tiedemann Advisors has about $20 billion in assets under management, and affiliated companies manage another $5 billion. TIG Advisors, a New York-based alternative asset manager owned by Tiedemann Group, has approximately $7 billion in AuM. Alvarium’s investment advisory, merchant banking and family office businesses advises on around $22 billion in assets.
According to an investor presentation put together for the merger, assets are projected to nearly double in five years, reaching $100 billion by 2026, with EBIDTA profit margins of around 40 per cent.
Those projections are realistic, Tiedemann said, based on the MFO’s “historic growth rate,” the law of compounding and expected growth in merchant banking and real estate.
Indeed, Tiedemann cited the multiple lines of business of the combined firms and an expanded UHNW international client base as “key” to its success.
“The client base will be all over the world,” he explained, “and able to contribute investment ideas as well as referrals to money managers and other families.”
Some MFO executives in the US characterize the Tiedemann Alvarium merger as a “very big deal” with global significance that could prove to be precedent setting.
“This will be a closely watched effort and one that may greatly inform the strategy for other RIAs down the road, particularly if it turns out to provide a material competitive edge,” said Bill Woodson, executive vice president at Boston Private, a SVB company and head of the firm’s wealth advisory and family office services group.
Others question whether clients will be comfortable with an MFO that becomes a large public company.
“I would agree that this type of large, international merger brings together deep capabilities,” said Kathy Lintz, partner and managing member of Matter Family Office in St Louis.
“However, one might wonder if their multigenerational clients, who selected Tiedemann as their family office when they were private and much smaller, will be enthusiastic to be served by a large public company.”
In addition, the transformation from a boutique MFO to a publicly-traded financial firm with a multi-service product line may impact “culture, priorities, and structure,” Lintz noted. “This change could have a meaningful effect on team and talent.”
Public vs private vs PE
Tiedemann defended the move to go public via a SPAC.
Becoming a publicly traded company helps guarantee the MFO’s promise to clients of having “permanent” ownership, Tiedemann stated. That would be difficult to achieve by remaining private, he maintained, and impossible if the firm sold shares to a private equity company.
A private equity deal “would be a sale,” Tiedemann said. “It’s selling the business.”
As for SPACs, Tiedemann said he “understands the criticism of the structure,” which SEC chair Gary Gensler has called a “rather costly exercise in financial engineering” with “inherent conflicts.”
A SPAC allows the US multi-family office and UK investment manager to focus on their business combination instead of on a costly roadshow, Tiedemann explained. What’s more, a SPAC creates more “efficiency” for “becoming a public entity” he argued.
Going public also creates more transparency and, of course, equity, which, according to Tiedemann, will help the company to attract and retain top talent. Because the two firms have complementary business lines, there is “virtually no redundancy,” he said, and he doesn’t expect jobs to be eliminated.
Indeed, Tiedemann is no stranger to M&A transactions, having bought two major RIAs in the past decade, Presidio Capital Advisors in San Francisco and Threshold Group in Seattle.
ESG: Tip of the spear
The combined firm will prioritize ESG investing, a Tiedemann Advisors specialty which was “a prime point of attraction” for Alvarium, according to Tiedemann.
ESG and impact investing has become increasingly important to Tiedemann’s institutional and family clients and is one of the fastest growing areas of the firm, he said.
Tiedemann first staked a claim to ESG expertise by buying Threshold in 2017. The increased “depth and resources” resulting from the Alvarium merger will allow the new company to offer an even larger ESG platform to clients, Tiedemann said.
Further boosting its ESG bona fides, Tiedemann hired Jed Emerson, author of Impact Investing: Transforming How We Make Money While Making a Difference, as global lead of impact investing this summer. It also plans to bring Alvarium’s UK “Home REIT” model of a public-private partnership to help address housing issues in the US.
“It will be one of our first orders of business,” Tiedemann said.
Clearly, Michael Tiedemann is aiming big.
How will clients react?