Schroders has struck a deal to buy Cazenove Capital for £424 million and has committed to keeping the firm's wealth management brand.
Under the terms of the deal Cazenove Capital shareholders will receive 135p in cash per ordinary share.
Schroders said the acquisition will provide economies of scale, principally in UK funds distribution and infrastructure, and it expects to achieve pre-tax cost synergies of between £12 million and £15 million per annum.
In a statement to the London Stock Exchange, Schroders said the acquisition reflects its strategy of growing its private banking business, while strengthening its position in UK Intermediary.
'Cazenove Capital's culture of client focus and investment excellence are a strong fit with Schroders,' Schroders chief executive Michael Dobson said in a statement.
'This transaction creates a leading, independent private banking and wealth management business in the UK, and brings additional investment talent in complementary strategies across UK and European equities, multi-manager and fixed income to asset management. I am confident the transaction will create long-term value and benefits for clients, shareholders and employees.'
The merged entity, according to figures from 31 December 2012, will control £28.4 billion in assets under management and will make Schroders a one-stop shop, offering investment management, financial planning, deposit-taking and lending services.
Schroders has committed to continue using the 'highly regarded' Cazenove Capital brand within its private banking business, with Cazenove Capital chief executive Andrew Ross named as UK private banking head, reporting to Schroders group head of private banking Philip Mallinckrodt.
Mallinckrodt said: 'We believe the combination of our two businesses will bring significant benefits and enhanced opportunities for our clients. The complementary fit between our two firms, the strong shared service culture, long-term investment approach and established heritage of both businesses make this an ideal match.'
Ross added: 'This is a very exciting development for Cazenove Capital. In combining with Schroders, we will create a pre-eminent independent private banking and charities business in the UK, with a broader capability covering investment management, financial planning, deposit-taking and lending services. This is also an excellent fit for our wealth management businesses in the Channel Islands and Asia.
He added: 'Cazenove Capital has succeeded by putting the interests of its clients first and that will continue. Our charity and private clients will continue to be looked after by their existing teams whilst benefitting from a broader range of services and more extensive geographical investment expertise'
The deal increases the size of Schroders UK intermediary business by £5.1 billion, with Cazenove's high regarded UK and European equity team, which includes AAA-rated Julie Dean, Paul Marriage and Matt Hudson, along with European equity head Chris Rice agreeing to join Schroders.
'For our investment funds business, this represents an opportunity to continue our distinctive business cycle investment process while benefiting from the support of Schroders' extensive distribution capabilities,' Ross said.
'This is a transaction which delivers attractive value for our shareholders and, importantly, will also lead to clear benefits for our clients and improved opportunities for employees.'