Philipp Rickenbacher is ready to hit the acquisition trail after Julius Baer's year-long stint in the penalty box ends. He is eager to catch up with rival wealth managers in a hot, lucrative niche of finance, finews.com reports.
The Zurich-based wealth manager believes Switzerland’s regulator Finma will lift its time-out from dealmaking soon, it signaled last month. The move would mark an end to a messy four-year clean-up – and it also allows CEO Philipp Rickenbacher to focus on how to grow.
The Swiss banker has emphasized organically growing, by acquiring teams but also conceded last month that he wouldn’t shy away from a 100 billion Swiss franc ($112 billion) asset deal. This represents roughly double what Julius Baer swallowed in its last «mega» purchase: Merrill Lynch’s private bank outside the U.S. in 2012.
Hunting The «CEO Deal»
Rickenbacher’s desire to acquire is a chance at legacy-building through a «CEO deal,» as one insider puts it. He has already informally sniffed around at least one specialized asset manager, a source familiar with the matter told finews.com – to no avail. A spokesman for Julius Baer declined to comment.
The advance lays bare that Julius Baer’s interest right now isn’t in acquiring private banking money – but in bolstering its content, its products, and its ideas. The 126-year-old private bank desperately needs a differentiator to offer its wealthy clientele.
Market Nooks and Crannies
Rickenbacher, this person believes, is preparing to dial it up with a deal to «move the needle» – and prove he can translate his strategy skills into manager reality. «The segment of clients wants a wealth manager to open the door to specialized investments,» a banker told finews.com.
The idea for the self-declared pure player to build in asset management arm isn’t necessarily new, but has taken on renewed urgency: the wealthy are increasingly seeking inaccessible nooks and crannies of the market because bonds don’t pay and stocks remain frothy. The bank’s current thinking centers around finance niches, where it is a neophyte compared to rivals like Pictet, Rothschild & Co, or LGT, which all maintain considerable private equity teams.
Template: Goldman Sachs
Other blank spots on its offering are venture capital, private debt, real estate deals – or even hedge funds, which have enjoyed a buoyant start to 2021 after a decade-long ten-year rough slog. The differentiator is co-investing directly with the bank – an approach Goldman Sachs (of all companies) has quietly perfected in the ultra-high net worth space.
The hire last year of Giuseppe De Filippo from UBS is a start. It’s not that venture capital, private debt and equity, or real estate deals are foreign terms at Julius Baer – it’s that Rickenbacher’s 1,376 private bankers have little direct access, and usually need to go through fund-of-funds, which pile fees on clients.
Firepower Vs Obstacles
If acquiring sounds simple in practice – and Julius Baer has ample firepower to back up its ambitions – Rickenbacher still has three problems: first, he needs to get Finma to let him start looking at pitch-books again.
The regulator didn’t comment on when a freeze for transformative deals by Julius Baer would lift. His second problem is that Julius Baer, just off a 113 million franc buyback, committed itself to another one, of up to 450 million francs over the coming year.
Buying Outright Vs Partnering
Julius Baer would almost certainly drop or subjugate the buyback plan if the right deal came along – or of course tap the capital market, as it did in 2012 for Merrill Lynch with a 750 million franc rights issue. Rickenbacher may also be forced to accept a partnership or joint venture if the right deal isn’t feasible.
Private boutiques – like Hermance Capital, launched in 2015 by three private Genevan wealth managers – are often structured as partnerships. Many are either not for sale or way too big for Julius Baer (the market cap of Partners Group, which recently began working with UBS, is nearly 30 billion francs to Julius Baer’s 12.2 billion francs).
Dealmaking is part of a handful of key challenges facing Rickenbacher, who took became CEO of the bank 18 months ago. Further afield, Europe offers big private equity players like Eurozao or Astorg in France. A deal in the U.S., where Julius Baer is keen to gain a foothold as finews.com reported in December, the U.K., or Asia are also options, a banker said.
Peter Hody contributed reporting
