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&#39Benchmark set for future acquisitions&#39

The cut-price deal that Insight Investment has struck for Rothschild Asset Management is likely to set the benchmark for future acquisitions.

Insight paid only £61m for RAM, which includes £11bn of retail and institutional funds under management and £20m of net cash, valuing the company at just 0.55 per cent of its assets.

The deal is in stark contrast to the £1.9bn Prudential paid for M&G in 1999 – more than 10 per cent of its assets under management.

Despite Insight not acquiring the RAM brand, fund managers and IFAs believe the deal will mark a seismic shift in future negotiations.

One fund manager says: “There were exceptional circumstances – RAM has a lot of assets but was losing money – but it will still represent the benchmark from now on. The days when fund managers went for 10 per cent of assets are in the past.”

Fund managers say the focus for acquisitive companies is now on profitability rather than assets, which partly explains why Insight paid around half the reported asking price for RAM. But they believe cost-cutting measures will be difficult to implement with firms such as RAM which have expensive multimanager admin systems.

Another consequence of the Insight deal, according to IFAs, may be that struggling companies postpone putting themselves up for sale with so little chance of selling at a premium.

Chartwell Investment Management director Patrick Connolly says: “Now is not the time to be putting yourself on the market. No one will pay the asking price, even if they could afford to. Companies will now try to hold on for as long as they can before selling.”

RJ Temple marketing director Ian Millward says: “The investment industry is in a recession and there are now bargains to be had. Deals for £500m such as Jupiter had been looking for have long gone.”

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