Our strategic ambitions for 2021 focus on three key areas:
1. Clients & Services
Capture opportunities to expand and diversify our service offering, both organically and through M&A
- Grow our Fund Administration and Capital Markets offering and invest in business development and new client solutions
- Focus on US and Asia whilst continuing to look at other M&A opportunities to enter into new markets
2. Innovation & Technology
Develop our technology foundation to serve changing client needs
- Focus on security, safety and scalability
- Empower clients through portal technology
Develop and maintain a dynamic and engaged global talent pool
- Create a purpose-led and value-driven culture
- Provide a platform for personal and professional growth
We provide world-leading, specialised administration services to clients in over 30 jurisdictions. Our focus on bespoke corporate, fund, capital market and private wealth services enables our clients to invest, grow and thrive anywhere in the world. Sitting at the heart of international business, our local, expert knowledge and innovative, proprietary technology combine to deliver a compelling proposition – all of which keeps our clients one step ahead.
The market has demonstrated notable resilience during economic downturns and healthy growth during the upturns.
Our clients are varied, coming from the corporate market; the funds market (private equity, real estate, hedge funds); the financial institutions market; and the private clients market. Generally we support them in the formation and implementation of entities, the domiciliation and management of entities, legal administration, accounting and (regulatory) reporting. The experience and expertise of our local employees is key to our ability to provide clients with premium value-added services and build long-term relationships.
More often than not, client entities are formed to facilitate cross-border investments and acquisitions with a mix of business, legal and tax considerations. These include risk management or asset protection factors; the attractiveness of a location for investment funds; and the legal, political, financial and regulatory stability that a location offers.
Our services cover the entire lifecycle of a client entity: from incorporation to ongoing maintenance and compliance, through to liquidation. As the average duration of a client entity is around seven to ten years this provides predictable and recurring revenues.
Intertrust Group operates in more than 30 jurisdictions across Europe, Middle-East and Africa, the Americas and Asia Pacific through a network of over 45 offices. Geographically, we focus on countries in which the legislative, regulatory and judiciary landscape is highly developed and reliable such as the Netherlands, Luxembourg, Cayman Islands and Jersey.
Jurisdictions may also be selected if they offer clients good access to capital markets, an experienced, highly educated workforce and a strong network of local advisors, among other features. The characteristics that legal entities offer in terms of cost, maintenance and liquidation play a part too, while the attractiveness of local tax legislation and the number of relevant international (tax) treaties can play a role.
The expert administrative services market is fragmented comprising mainly regional and multi-regional providers on the one hand and medium-sized or smaller local providers on the other. Regional players may offer a broad range of services, but are often focused on specific jurisdictions in one or more regions. Local providers meanwhile, tend to have a narrow service offering and can only provide limited geographical coverage. In addition, some major banks, fund administrators, legal and accounting firms also operate in specific segments.
Within this competitive landscape, Intertrust Group is one of the few global, dedicated full-service providers. As a leading consolidator in the market, we are able to apply economies of scale and a wider service offering of high-value trust, corporate and fund services in multiple jurisdictions. “We are a leading consolidator in the market.” Our listed status has underscored our transparency, added to our attractiveness as an employer and made us the ‘go-to’ company for corporations, funds, financial institutions and private clients.
What’s more, the trust, corporate and fund services industry is growing – driven by the internationalisation of corporate and investment activities and key market trends. These drivers and trends are increasing the number of client entities and the level of services required by each one.
Leaders in bespoke corporate, fund, capital market and private wealth services We power businesses to succeed with our world-leading, specialised administration services.
We operate from a global network of more than 45 offices in over 30 jurisdictions from which we administer approximately 57,000 entities for our clients, enabling them to grow successfully, operate their businesses efficiently and responsibly and fulfil their international legal, administrative and regulatory duties. In addition to our offices, we have an approved partner network of in more than 100 jurisdictions where we did not have a presence, allowing us to assist our clients by referring them to our partners in jurisdictions where we do not have an operational presence. Our leading global position provides an advantage over smaller providers who may provide a narrower service offering or who operate in fewer jurisdictions.
We provide a wide range of world-leading administrative services to our clients across our service lines: Corporates; Funds; Capital Markets and Private Wealth. We also provide various regulatory and compliance services which are offered across all our four service lines. Our services are supported by our continuously developing technology foundation and include core services offered in nearly all offices and more specialised services provided from selected locations. We are an experienced and expert player, servicing our clients for more than 65 years in an increasingly complex global environment and a market becoming increasingly focused on quality. Our customers have come to trust our reputable and global brand to deliver mission-critical services.
Global secular and sustainable growth factors across highly regulated markets
Our addressable market, representing our service lines in the 13 key expert administrative services jurisdictions (including the US, Luxembourg, the Netherlands, the Cayman Islands, Jersey, Guernsey, Switzerland, Hong Kong, the UK, Ireland, Singapore, Curacao and Spain) which we primarily focus on is approximately €6.5 billion in size and has grown at approximately 3% to 5% annually between 2015 and 2018, driven by growth in most of our service lines. Our Funds service line is currently within the fastest growing market among our service lines, with annualised forecast growth of 7% to 9% for the period from 2018 to 2021. Our clients operate in an increasingly complex global environment focused on compliance, business ethics and transparency and we have a strong track record of successful cooperation with regulators in key jurisdictions. Regulation is an important and resilient driver of our market growth, in addition to increased complexity and specialisation of the services that our clients require. Historically, we have seen the consistent introduction of regulation, and the pace and magnitude of change is increasing. As such, our client entities often require additional services in order to ensure compliance with new regulations, resulting in higher ARPE across our service lines. There are a number of ongoing and future regulation initiatives which represent further opportunity, such as the Fourth and Fifth Anti-Money Laundering Directive (“AMLD”) and the US tax reform as well as potential legislation concerning the upcoming departure of the UK from the EU (“Brexit”). In addition to increasing global regulation, our addressable market benefits from a number of other underlying and continued drivers of growth:
- Globalisation, Economic Growth and M&A Activity. Our markets are continuing to grow due to the increased internationalisation of corporate and investment activities. As global assets under management continue to grow, our clients require our services in order to deploy and monitor capital in a way which is compliant, transparent and ethical and which fulfils specific legal, administrative and regulatory duties. Corporations investing across numerous jurisdictions require our services to implement tax efficient entities and assist them in compliance with both local and international standards. Regulatory developments (such as the Action Plan on Base Erosion and Profit Shifting (“BEPS”), the Anti-Tax Avoidance Directive (“ATAD”) and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting) may result in greater services per entity to maintain compliance, while reducing entity growth in certain jurisdictions.
- Regulation, Substance Requirements, Complexity of Client Entities, Need of Additional Services and Outsourcing. In addition to increasing regulatory complexity, increasing compliance requirements for clients drive the demand for transparency and substance related services (which in turn drives billable hours per entity and ARPE). Clients are increasingly relying on expert external providers to handle growing regulatory, risk management and compliance requirements due to their specialised capabilities and greater scale. This increased outsourcing allows organisations to focus on their core capabilities, reduce administrative burden, manage costs and reduce organisational complexity.
A resilient business model providing mandatory and “mission-critical” services on a recurring basis.
We provide mission-critical, non-discretionary services, which help to ensure that clients are compliant with relevant regulations and are therefore considered critical from a legal, regulatory, financial, reputational and risk management perspective. For our clients, the costs associated with providing our range of administrative services are often considered to be non-discretionary, since our clients generally require these services irrespective of their financial or operational performance, given the costs of failure can be high, both in terms of the severity of penalties (including fines or criminal prosecution) and the potential reputational damage suffered as a result of non-compliance.
We estimate that approximately 90% of our total revenue is generated by on-going compliance and maintenance services of client entities which for the most part can be considered as recurring. The remaining 10% relates to non-recurring revenue such as revenue generated by incorporations and liquidations.
Our business model benefits from added resilience due to the high-cost of switching administrative service providers, both financially and through the risk that critical services might not be provided to the same quality. In addition, the non-discretionary nature of our offering means that macro-economic fluctuations have historically had limited impact on our industry as expert administrative services required are not dependent on financial or operational performance. Our wide range of expert administrative services provides a complete solution for both event driven demands and for the ongoing requirements of doing business.
Diversified client base across service lines and geographies
Our longstanding clients are diversified across our service lines: Corporates; Funds; Capital Markets; and Private Wealth. In addition our clients are also diversified across geographies. As of September 30, 2018, we had clients based in approximately 140 jurisdictions and were not reliant on any single jurisdiction for our revenue. The Netherlands accounted for €116.4 million (23.7%), Luxembourg for €105.2 million (21.4%), the Americas for €85.1 million (17.3%), Jersey for €57.6 million (11.7%) and the Rest of the World for €126.5 million (25.8%) of our revenue for the twelve months ended September 30, 2018 amounting to €490.8 million. Similarly, we had a diversified client portfolio with our ten largest clients accounting for approximately 8% of our revenue for the year ended December 31, 2017, and none of our clients representing more than 1.6%.
Our wide range of services provides a diversified product offering, including core services such as incorporation, management, legal and tax compliance, reporting and liquidation, and also specialised services such as fund administration, depository services, portfolio administrative services, treasury and investment services and investor reporting. Core services are offered across all our four service lines, whereas specialised services are more specific to the relevant service line. Core services represented approximately 75% of our revenue in the twelve months ended September 30, 2018, and our specialised services represented approximately 25% of our revenue in the twelve months ended September 30, 2018.
We have a high quality client base representing a broad array of industries and are focused on multinational corporations, financial institutions, fund managers, high net worth individuals and family offices. As of September 30, 2018, our client base included 60% of the Top 10 and 50% of the Top 50 Fortune 500 companies as well as 80% of the Top 50 of the Private Equity International Top 300. Our longstanding relationship with our high quality clients supports our ability to secure multi-year contracts and to cross-sell our wide range of services.
Proven track record of synergetic acquisitions and well positioned for further consolidation in a fragmented industry
We have a proven track record for successful and value-accretive acquisitions in a historically fragmented market, completing eight selective and successful acquisitions since 2011. Our number of client entities grew from approximately 40,000 at the end of 2015 to approximately 50,400 at the end of 2017, primarily as a result of strategic acquisitions. Our number of FTEs grew from approximately 1,700 at the end of 2015 to approximately 2,500 as of September 30, 2018, approximately 650 of which were attributable to our strategic acquisitions. We aim to capture and diversify our service offering and our strategic rationale is to further increase scale, provide complementary services, expand our footprint and acquire technology enablers. For example, our acquisition of Elian in September 2016 strengthened our capital markets, as well as our private equity and real estate fund administration services, expanded our geographic presence to Jersey and added scale in other key jurisdictions such as Ireland, the United Kingdom and the Cayman Islands.
We have instituted acquisition and integration procedures aimed at identifying and assessing targets against clear strategic rationale and priorities, as well as potential risks and are selective through strict criteria such as: revenue growth and profitability; potential to fit into and complement our business; and quality of client portfolio. We have a robust internal M&A process framework in place with oversight and final sign-off provided at the Parent Guarantor’s supervisory board (“Supervisory Board”) level and procedures for integration to ensure risk mitigation. Integration is focused on fostering organic growth and our aim is to retain services of key individuals and clients.
There are further opportunities for consolidation within the fragmented expert administrative services market and we are in a strong position to source value-enhancing opportunities and extract synergies given our global platform and wide-reaching in-jurisdiction presence, with a clear focus on verticalization and expansion into selected new jurisdictions and regions such as the US and the Asia Pacific region and expansion and diversification of our services in new and existing sectors such as private equity and real estate fund administration, compliance services and capital markets.
Industry-leading risk management standards
As a global player, we have enjoyed the reputation of applying high compliance and risk management standards across our global network as the potential failure by us in this regard could have a material adverse effect across our business. The responsibility for establishment and oversight of our risk management framework lies within our management board (“Management Board”), but we have also adopted a “three lines of defense” model to manage our risk:
First line of defense – Business: Our business teams bear primary responsibility for identifying, controlling and monitoring the risks within their processes, maintaining effective internal control frameworks and adhering to global compliance policies and standards.
Second line of defense – Compliance and Risk Management: Our compliance and risk management team (“Compliance and Risk Management team”) is globally responsible for coordinating, developing and monitoring our risk management processes and adherence to compliance standards and procedures. The Compliance and Risk Management team is responsible for providing the independent risk reports to our executive committee (“Executive Committee”), Supervisory Board and our audit and risk committee (“Audit and Risk Committee”). The Compliance and Risk Management team also monitors changes that may impact the risk profile of the business and whether it is appropriate to provide new services to existing clients. The Compliance and Risk Management team further ensures that employees in every office receive compliance training, in addition to the mandatory Group-wide e-learning courses on anti-money laundering (“AML”) and other relevant topics.
Third line of defense – Internal Audit: The independent internal audit team (“Internal Audit team”) conducts audits that provide insights into how and to what extent we control the risks that may jeopardize our strategic and other objectives. These audits provide management with additional assurance on the effectiveness of internal controls and risk management.
We power businesses to succeed with our world-leading, specialised administration services
Our business model has historically demonstrated consistently high and stable margins and is highly cash generative, with Adjusted EBITDA margins of 40.3% for the twelve months ended September 30, 2018, and 40.4%, 42.1% and 42.8% for the years ended December 2017, 2016 and 2015, respectively. Similarly, our Adjusted EBITA margins were 38.1% for the twelve months ended September 30, 2018, and 38.2%, 39.9% and 40.7% for the years ended December 31, 2017, 2016 and 2015, respectively.
As a provider of world-leading administrative services, we have relatively limited requirements for capital expenditure such as investment in property, plant and equipment. Since 2015, total capital expenditure has been below 4% of revenue. Operational efficiencies are additionally supported by our continued focus on and investment in our IT systems and technology foundation, for which we have reduced the number of data centers in use and have enhanced the speed to market of new applications such as client portals. We have low effective tax rates in our key markets (the Netherlands, Luxembourg, the Cayman Islands and Jersey) and low net working capital requirements. As a result, we have strong cash generation.
Experienced management team with a clear strategy, supported by a dynamic and engaged talent pool
The transition of our management team is now complete. Our management team benefits from an average experience of approximately 20 years in the financial services industry and has implemented a clear strategy focused on clients and services, innovation and technology and our people in order to achieve operational excellence. In addition, our management is supported by a dynamic and engaged global talent pool with more than 4,000 employees from over 90 nationalitiesthe majority of whom have higher education degrees or qualifications. Our employees include trained financial experts, lawyers, tax lawyers and accountants with 74.6% of employees in billable FTE roles as of September 30, 2018.
We emphasise the importance of developing and maintaining our talent through strong teams, creating platforms for personal and professional growth and a values-focused culture based on our four key values: responsiveness; innovation; collaboration; and excellence. For example, we developed the Global Mobility Programme, in which we seek to support the international mobility of our employees with a view to further developing the skillsets of our employees and further increasing cooperation, knowledge sharing and cross-selling across our global network, and further learning and development opportunities through which we train and educate our employees on a variety of key topics.