Liontrust's failed attempt to buy GAM has raised questions over the credibility of its management team, as analysts are split over whether it can fully recover from the unsuccessful bid.
Liontrust's offer received the support of only 33.45% of GAM shareholders, just over half of the required 66.6%.
Liontrust bid fails as GAM enters discussions with shareholder group NewGAMe
Ben Yearsley, director of Fairview Investing, described the failed deal as "a bit embarrassing for Liontrust... it was not even close".
"It feels like they underestimated how complicated it can be trying to buy listed companies as opposed to private ones," he said.
Liontrust's share price currently trades 12.9% higher on this morning's news, while GAM's is up 4.5%, according to data from Morningstar Direct.
"As we have consistently noted throughout this sorry affair, we saw the deal as a value destructive one from a Liontrust perspective," said Numis analyst David McCann.
Despite the deal falling through, McCann warned it was possible there would still be a hit to Liontrust's share price in the future due to "management credibility", including over whether there was any "regulatory impact from the allegations made of improper conduct in recent days".
Yesterday (23 August), Liontrust CEO John Ions was accused by investor group NewGAMe of lying to investors about the views of one of GAM's major shareholder.
"It remains to be seen whether there will be any temporary or lasting damage that has been done to the Liontrust brand as a result of this debacle," McCann said.
Peel Hunt analysts said in a note that GAM "would have brought significant execution risks" to Liontrust, with only "uncertain financial benefits given continuing falls in its AUM".
McCann observed that Liontrust's share price had declined by about 37% since rumours of the deal emerged, though said some of this was due to "weaker than expected trading of the existing business".
While the failed deal may be seen as positive for Liontrust, Darius McDermott, managing director at Chelsea Financial Services warned that for GAM "the lack of a deal and no viable alternative means the company is now in a bit of a limbo".
"The firm could have moved on - yes, there would have been some cost cutting, but it would have provided stability," he said. "It is no secret GAM is losing money and needs fresh capital."
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The aborted bid also left the possibility of further M&A for Liontrust "as either predator or target", according to the Peel Hunt analysts.
They explained the firm's management had shown a willingness to undertake "large, complex acquisitions" to diversify its business, while its falling share price and low valuation left it vulnerable as "a target for others".
Liontrust is also set to pay up to £11m in costs related to the offer, primarily related to corporate finance, extended legal expenses, accountancy services and third-party due diligence.
"Whilst we think the shares could enjoy a minor relief rally today to reverse some losses incurred since the deal was announced, we think it is highly unlikely that the full share price losses will be significantly recovered any time soon," concluded McCann. "We would continue to avoid the shares."
By contrast, the Peel Hunt analysts upgraded Liontrust's recommendation from ‘under review' to ‘buy', setting a 790p target for the share price, arguing the deal falling through "de-risks the Liontrust investment case".
Liontrust declined to comment.
