Wilmington Trust to sell CIT business of $115B

Wilmington Trust is selling its collective investment trust business in one of the most significant divestments since being acquired by M&T Bank. | DBT PHOTO BY JACOB OWENS

WILMINGTON – In one of the most significant divestments of its M&T Bank tenure, Wilmington Trust announced Monday that it will sell its collective investment trust (CIT) business with about $115 billion in assets to a private equity firm.

The wealth management and corporate and institutional services subsidiary of Buffalo, N.Y.-based M&T will sell the business segment to Chicago-based Madison Dearborn Partners, which will spin it off to an independent company with a new brand name owned by funds affiliated with the firm.

The terms of the deal, including the acquisition price, were not disclosed in regulatory filings Monday. Officials said the deal is expected to close by mid-2023, subject to customary closing conditions and regulatory approvals – although notably, the U.S. Securities and Exchange Commission does not oversee CITs, but rather the Office of the Comptroller of the Currency.

CITs are investment vehicles similar to mutual funds that are held by banks and trusts. Retail investors cannot invest in them directly like a mutual fund, but they do pool investments from employer-sponsored retirement plans like 401(k)s, pension plans, and insurance companies.

Wilmington Trust’s CIT business, under its Institutional Client Services (ICS) division, currently manages assets for more than 550 funds across a family of about 45 subadvisors, including AllianceBernstein, BlackRock, Franklin Templeton, MetLife, Neuberger Berman, and Raymond James, among others. Its assets under management have reportedly grown by more than 200% in the past three years as it bulked up its relationships.

Jennifer Warren | PHOTO COURTESY OF M&T BANK

“The CIT portfolio has shown tremendous growth since M&T Bank acquired Wilmington Trust in 2011,” Jennifer Warren, senior executive vice president and head of ICS at Wilmington Trust, said in a statement announcing the sale Monday. “We believe this is the natural next step in the evolution of the business and will help ensure CIT services and offerings continue to develop in ways that current and future clients will require to meet their investing needs. Furthermore, this transaction will enable our remaining ICS businesses to deepen their focus on clients and further optimize their products and services as ICS continues to execute its vision to become the global leader in institutional trust services.”

The deal will reportedly impact about 60 employees, although only a portion of them are located in Delaware. Despite having a large Wilmington workforce, Wilmington Trust has offices across the U.S. and in Dublin, Ireland, as well.

Taking the helm of the yet-to-be-named new company under MDP ownership will be current Wilmington Trust Executive Vice President Rob Barnett, who is currently based in the Boston area, but another local face will be involved. Bill Farrell, the recently retired president and CEO of Wilmington Trust, will reportedly serve as chairman.

“The CIT business is an industry leader, well-respected, and recognized for its successful track record of innovation. This transaction will help ensure continued growth for our business, people, and clients well into the future,” Barnett said in a statement. “MDP has extensive experience in financial services and will add significant value to our newly formed company. We are excited about this next chapter and will continue to offer our strong customer-centric services to the retirement market with the substantial resources and expertise the MDP team will bring to bear.”

The 30-year-old MDP, which has raised more than $28 billion in capital, specializes in the acquisition and management of financial services businesses, including previously shepherding EVO Payments, Navacord, NFP, and The Ardonagh Group.

According to officials, “MDP’s experience with scaling and growing businesses in the financial services industry will enable Wilmington Trust’s CIT business to deepen and expand its trustee and administrative services customer relationships through increased investment in product capabilities, technology solutions (including the recently launched BoardingPass platform), and strategic acquisition opportunities.”

“As clients increasingly demand innovative and tailored retirement fund solutions, the Wilmington Trust CIT business will be well-positioned as an independent company to expand new and existing relationships with a focus on helping plan sponsors navigate complex retirement and regulatory challenges,” added Vahe Dombalagian, managing director and co-head of MDP’s Financial and Transaction Services team, in a statement. “We look forward to working with the Wilmington Trust CIT team to execute a growth strategy that strengthens the business’s leadership position in the competitive market for third-party trustee and administrative services.”

Wilmington Trust was acquired by M&T in 2011 after a collapse of the once venerable local bank, with the growing regional New York bank retaining the local branding for its wealth management platform. Since then, Wilmington Trust has continued to be one of M&T’s most important assets in Delaware, dealing with its global and institutional investments.