With foresight, then-director Dick Niezing of Intertrust already said in June 2017 that the Dutch trust sector, then 150 offices in size, would shrink considerably if the regulator De Nederlandsche Bank set stricter requirements for controls and risk management at trust offices. At the time, Niezing was a member of the parliamentary inquiry committee that investigated the role of the Netherlands in tax structures. This Friday, more than four years later, his successor at Intertrust, Shankar Iyer, had to announce to be in exclusive conversation with the American investor CVC Capital Partners about a takeover. CVC offers 18 euros per share, 43 percent more than Thursday’s closing price. In total, the acquisition of the Dutch trust office CVC would cost 1.63 billion euros.
With this, Intertrust – located in Amsterdam and good for about 4,000 jobs – seems to be joining the trend that Niezing had already foreseen in 2017: consolidation. Not necessarily out of free will, but because of dissatisfied shareholders, who have seen the profits of the trust offices evaporate in recent years. And under pressure of stricter supervision.
Increasingly strict supervision
Trust offices have been subject to increasingly strict supervision in recent years. These stock exchange intermediaries take care of or check the financial administration and arrange tax affairs of other companies or investors. The most favorable tax rate is often sought, a practice that has come under a magnifying glass with the publication of the Panama Papers, among others.
Intertrust, the largest trust office in the Netherlands and part of Fortis Mees Pierson until it became independent in 2009, works for the international football association FIFA, among others, and has already been negatively in the news because it had helped thousands of customers to avoid tax. The financial services provider went public at the end of 2015.
CVC already bought TMF Capital, another large Dutch trust office, in 2017.
In the press release that Intertrust issued before the stock exchange on Friday, a possible merger of Intertrust with TMF Capital is mentioned. In any case, a merger of Intertrust and TMF under CVC’s wing could make the trust offices’ increasingly heavy supervisory burden more bearable. The tightened rules have led to significant cost increases at the trust offices, which had to invest much more time and effort in verifying transactions. This is at the expense of the profitability of the offices. Earlier this month, Intertrust was in the news because of an open letter from a disgruntled shareholder about the results.
Gatekeeper Function
The American investor Hawk Ridge Capital was not happy that the financial services provider has not lived up to expectations for years and that it is growing less fast than the market as a whole. Hawk Ridge Capital already suggested that Intertrust would be better off merging with an industry peer.
Chairman Martin Wörsdörfer of Holland Quaestor, the association of trust offices, understands Intertrust’s move well. “The larger offices in particular benefit from looking for economies of scale. The requirements and criteria that the sector must meet have become increasingly strict, and that takes time and manpower. It is about combating money laundering, filling in the gatekeeper function.” Wörsdörfer thinks it is right that the trust sector, like the banks, has been given a role in the prevention of fraud and money laundering. “De Nederlandsche Bank is on top of it, and that’s a good thing. If these kinds of steps help, I’m happy about it.”
It is also questionable to what extent the Dutch government continues to see the trust sector as valuable. Last summer, outgoing minister Hoekstra (Finance, CDA) suggested that he wants to investigate whether the sector does have added value. Finance will soon commission an external office to examine the entire sector. The results of this are expected before the summer of 2022.
A version of this article also appeared in NRC Handelsblad of 13 November 2021
A version of this article also appeared in NRC in the morning of November 13, 2021
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