Seymour Pierce and Arden Partners may merge

By This Is Money
Updated: 07:08 EDT, 14 November 2010

A merger scramble has kicked off in the City as two of the most famous broking names look for consolidation opportunities.

Goals: Chairman Keith Harris's sporting deals have propped up broker Seymour Pierce.

The collapse of traditional corporate finance work on takeovers and flotations has seen stalwarts Seymour Pierce and Arden Partners in talks to find wealthy partners.

According to City sources, Seymour Pierce, led by its charismatic chairman Keith Harris, has put out feelers to rival firms following concerns over its capital position.

The firm, best known for its role brokering deals for owners of football clubs, is said to have been close to breaching capital requirements set down by the Financial Services Authority. The danger has since been removed, according to City sources.

Harris, a former chairman of the Football League, recently brought in much-needed fees advising a bidder for Liverpool Football Club. Although the bid failed, revenues generated from the work, as well as fees from broking fast-growing Desire Petroleum, kept the firm well above the FSA's capital threshold.

This requirement - different for each firm as they operate a variety of additional functions such as fund management and trading platforms - is intended to minimise risk to the firm and its clients.

If a number of potential deals Harris had been working on, including the sale of Premier League clubs Everton and Newcastle, had succeeded last season there would have been no issue with the FSA's demands.

And any concerns about capital requirements would have been a distant memory if an attempt this year by the Red Knights consortium to acquire Manchester United from American owners the Glazers - a pet project of United fan Harris - had come off.

Arden, which is listed on the Alternative Investment Market and is believed to be in the sights of FTSE 250-listed rival Evolution Group, issued a profit warning in September. Though sources close to the situation said nothing is likely to come of the discussions, such a deal was on the agenda earlier this month.

Evolution, which failed to acquire rival Panmure Gordon after talks collapsed last month, is understood to need a deal to continue its growth plan. Arden's expanding Indian business would have fitted into the strategy of Alex Snow, Evolution's chief executive.

Evolution has grown to a market valuation of about £200m after a series of acquisitions and Snow, a former rugby union England B player, is keen to lead the business towards a more balanced structure. But this is difficult at a time when so many areas of corporate finance work have withered.

The board of Arden mandated chief executive Jeremy Grime to buy rival Fairfax, largely to bag its quoted funds team, as a solution to its problems, but then decided against the strategy and fired him last month.

Sources suggest the firm's founders decided against the move fearing that a takeover would dilute the value of their stakes.

In the meantime, WH Ireland, thought to be in the sights of South African financial services giant Sanlam, is another well-known City name that might soon be swallowed up.

Paul Compton, who arrived from hedge fund Toscafund in September, has been waiting for a permit from the FSA to become chief executive, though this is expected shortly. The firm made an operating loss of £587,000 for the first six months of the year compared with a profit of £287,000 last year.

Resources specialist Ambrian Partners, which also delivered a first-half loss, has seen analysts in its large cap and life sciences teams leave in recent weeks.

All four firms declined to comment.

Boss 'ready to sue' Arden over sacking

Jeremy Grime, who was chief executive of Arden Partners for four weeks before being fired last month, is understood to be taking legal action against the firm.

Grime, who was an analyst at the firm for three years before taking the top job, is believed to have contacted lawyers McGrath & Co about launching an action.

He is thought to have been fired by the firm

days after being directed by the board to pursue an acquisition of rival Fairfax.

Sources close to the situation said the board then staged a U-turn, influenced by the firm's founders, and that abrupt switch in strategy led to Grime's departure.

Grime declined to comment on the situation and Arden could not be reached for comment.