Management in £5m deal for Brewin Dolphin's advisory arm

Brewin Dolphin is to focus on growing its private client business after selling its corporate advisory and broking division in a management buyout deal valued at about £5 million.

About 20 staff from the firm's Scottish operations - which employs about 400 - are expected to transfer with the new unit, which will include 65 of the group's 1,870 staff throughout the UK.

Brewin Dolphin will receive some 1m as an up-front payment and will then take a 14 per cent "preferred" interest in the new entity valued at 4m.

The group will receive a 6 per cent return on its stake each year until 2017, with Brewin expected to hang on to its holding over the medium-term.

The spin-out will be called N+1 Brewin, taking its name from European financial advisory and asset management group N+1, which has teamed up with the division's managers to back the deal.

Jamie Matheson, Brewin Dolphin's executive chairman, told The Scotsman: "If you were to walk into our Edinburgh office tomorrow then you wouldn't notice a difference - it will be the same people dealing with clients and they will still be based in our offices for some time to come."

The deal is subject to regulatory approval but is expected to be concluded in September.

City analysts welcomed the sale, which they said may see the London-listed group being treated more as a "pure" private client and asset manager (PCAM).

Danielle James, an analyst at Shore Capital, said: "This deal makes strategic sense to us, given the subdued performance of the division.

"We believe the division's divestiture could see the group re-rated as a pure PCAM and achieve a rating more commensurate with peer Rathbones."

Numis analyst James Hamilton that the disposal would strengthen the group's balance sheet by freeing Brewin Dolphin from regulatory capital requirements of the business.

Mark Williamson, a finance and insurance analyst at Peel Hunt, said: "There is potentially a great deal of value in Brewin, but this has been the case for some time with the valuation arguably held back by issues relating to the strategic direction of the business.

"Sector leader Rathbones is valued at 18.7x earnings whereas Brewin is valued at 11.7x, with this valuation differential largely reflecting the variance in the operating margins."

But Matheson said: "There is a perception in the market that the corporate advisory and broking division took up a disproportionate amount of management time but that's not true.

"We intend to carry on working with the new company because this has not been a falling out situation."