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Mergers and Aquisitions

Establishing good relationships is important in any business - especially stockbroking. A common complaint from corporate and institutional investors is that stockbroking teams seldom stay in place long enough for a proper relationship to develop. But a new market player, Arden Partners, takes a more long-term view.

John Paterson, Arden's managing director, is a believer in stability for his clients if a good relationship is to be successfully built. "What clients are fed up with is seeing a new face every six months that turns up as either the analyst, salesman or corporate financier," Paterson said.

Arden has a stable team that has been together for more than a decade and prides itself on developing long-term relationships with clients. But although Arden is a new company, the team itself is one of the most established in the UK, according to Paterson. "They've been working together for more than 10 years, especially considering the comings and goings in London," he said.

The Arden team first come together at stockbroker Albert E Sharp (AES), then a partnership. This was taken over by Old Mutual plc and turned into an investment bank. At this point, the team decided to stride out on its own, preferring to have control of its own affairs.

Using their own equity, the 13 partners founded Arden with the help of outside shareholder Grahame Whateley, chairman of Castlemore Securities. The firm provides research, advice and a dealing service to its institutional and corporate clients. Paterson emphasised that Arden is an agency-only broker, something that has become increasingly rare since the "big bang" reforms to stockbroking in the 1980s. The research Arden provides covers sectors that include electricals, engineering, construction, transport, oil services, automotive distributors, and building materials.

This partnership approach is something that Paterson sees as an advantage. "I would argue we are more motivated than people who are working for some large investment bank," he said. Also, as each member has an equal share, and team members participate in making decisions. "The decision-making process is extremely flat, so if something does need to be done we can come back very quickly", Paterson added.

Also, as Arden was founded by its partners, there are fewer conflicts of interest than at larger institutions such as investment banks. "There are very few agency-only brokers," Paterson said. "What that means is that institutional clients give us an order, and know that we will act in their best interests. That is the key difference."

Arden deals with big players such as M&G, Prudential and Scottish Widows. It's relationship that Paterson is proud to have, especially amid fierce competition. "Typically [institutions] may have 15-25 brokers phoning them up," he said. "So it was a question as to whether they would put a new firm, such as Arden, on their dealing list."

Nevertheless, as the team behind Arden has an established reputation, with its analysts appearing in Reuter's survey, institutions have been quick to add Arden to their lists.

"The result has been 100% take-up, which is very reassuring to us," Paterson said.

On the corporate side, where Arden acts as either a financial adviser or corporate broker, Paterson said the response has also been better than anticipated. "In our original plan we didn't expect any [companies] would join us for perhaps six months. In fact after one month, Pendragon, a leading UK motor distributor, joined us."

Local knowledge

Arden is positioning itself in the small to mid-cap market, where Paterson believes a gap exists. He said that a number of smaller stockbrokers are experiencing difficult strategic issues, and larger houses such as Merrill and Deutsche are withdrawing from the small/mid-cap area, leaving Arden with opportunities it didn't originally anticipate.

One of the reasons for the larger brokers pulling out of the mid-cap market is that it is no longer cost effective. Most are based in London where the cost base is huge, so they tend to concentrate on the FTSE 100 companies. As Arden is based in Birmingham, with offices in Bristol and London. It doesn't have the high overhead costs.

Moreover, Paterson believes that being based in Birmingham is an advantage for Arden, as it gives the team a local knowledge that London-based stockbrokers don't have. "We know the local economy and local people, which allows us to build up a picture that we can pass on to clients."

Nevertheless, being based in Birmingham does not mean that Arden only has a regional outlook. Paterson wants to establish Arden as a national name in the financial community throughout the UK in the coming years.