Kingswood has no intention to stop its active UK M&A strategy and is “very open to conversations as they arise”.
This comes after the UK-headquartered wealth manager made its first acquisition of 2021 when it agreed to buy Lincolnshire-based financial planning firm Admiral Wealth Management for a cash consideration of £4m ($5.59m, €4.68m).
David Lawrence, UK chief executive at Kingswood, told International Adviser: “We’ve not even thought about pausing to be honest. We are getting presented with a rich range of opportunities.
“It’s fair to say we’ve widened our scope a little bit. Admiral added £100m of AuA, It’s fair to say that previously we were seeking much larger businesses than that as a starting point. But we’ve become more open-minded on size. We’re very open to conversations as they arise.
“I’m fronting all of them myself, so it’s a huge amount of my time but that’s yielding great results because they’re getting Kingswood from me. It’s very easy after that first conversation to understand if there’s a fit or not.
“We’re just incredibly active. Some fit and some don’t, but we’ve got a flexible model that can appeal to multiple firms.”
Integration
During a London Stock Exchange statement on 17 June 2021, the firm announced its UK acquisition pipeline for the next few months.
This included:
- Five targets where the firm has agreed “heads of terms and are at various stages of due diligence”. These will introduce an additional £1.9bn of client assets and £2.7m of operating profit on completion.
- It has made an offer to four further targets and is in detailed negotiation with those companies. These will introduce an additional £1.25bn of client assets and £4.5m of operating profit if concluded.
- The company has an additional nine opportunities “where positive initial conversations have taken place and information is being exchanged”.
Lawrence said: “We’ve got a great pipeline and hold several conversations with representatives of targeted firms for acquisition. It’s not a case of having a pipeline of 10 from 10 great conversations. We may have up to 50 conversations to get these 10.
“People ask me about integration. We have built a strong team to undertake this activity on a repeating basis and whilst at some point we may become capacity constrained, we are confident we can digest our existing pipeline and more.”
M&A activity continues in market
The large pipeline of deals for Kingswood highlights how active the M&A market is in the UK financial advice sector.
Lawrence said: “The market is not slowing. I think because of the fragmentation and the nature of the business, there is always going to be a lot of people that are approaching a time in life or an event in their life that means they want to sell their business. The level of opportunity continues to be there.
“I think covid has shown that wealth businesses are a strong investment, in part because of the level of recurring income in these businesses. Valuations of businesses continue to increase, particularly larger ones, though we have a clear acquisition criterion and a critical part of this is not to overpay.
“We are incredibly diligent in terms of not overpaying, over promising or being overexcited because the market could take you down that route very easily if you are not careful.”
Easier sales
Kingswood has been active in the acquisition market for a couple of years.
But it has now become a household name for M&A deals.
“The more transactions we do successfully, the more people are definitely saying, ‘I can see that you know what you are doing in terms of buying, integrating and retaining all the things that we value in our business’.
“I do think we’re building a good reputation for that, though it’s difficult for me to say whether the phone’s ringing twice as many times now as it was 12 months ago as I wasn’t here then.
“But if we deliver the transactions both UK and internationally that we’ve got listed and continue to build the pipeline, I think by the end of the year, we’ll be in a very different type of situation than we were perhaps two or three years ago.”
