AssetCo has reached agreement to buy Edinburgh-based Saracen Fund Managers for an effective total consideration of $3.9m (£2.75m).

The deal consideration includes a combination of 166,904 new ordinary shares of £10 each and 664,774 in cash.

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The acquisition is subject to FCA approvals, which are expected by the end of September this year.

Founded in the late 1990s, Saracen manages three funds on the T Bailey Fund Services platform: Global Income and Growth Fund, UK Alpha Fund, and UK Income Fund.

The company, which currently oversees £120m in assets, has net assets of £400,661 as of 31 March 2020.

Following the transaction, Saracen will retain its current brand and continue to operate from Edinburgh, while Saracen employees will enter new employment contracts.

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As part of the agreement, AssetCo directors Martin Gilbert and Peter McKellar will join the board of Saracen on completion of the deal.

AssetCo deputy chairman and CEO Peter McKellar said the proposed acquisition is part of the company’s overall strategy of acquiring and investing in asset and wealth management businesses.

McKellar added: “The industry is contending with multiple structural shifts, including demographics, fee compression and a greater focus on ESG. These are presenting challenges and opportunities for incumbent firms and we believe we can capitalise on this to help unlock value and to deliver for clients and investors.”

In March, AssetCo named Scottish fund management veteran Martin Gilbert as its new chairman.

Recently, AssetCo doubled its holding in asset management company River and Mercantile Group as part of its strategy to develop an asset and wealth management business.