viewKingswood Holdings Limited

Kingswood Holdings - Kingswood completes second US acquisition

RNS Number : 6798X
Kingswood Holdings Limited
20 December 2019


20 December 2019


("Kingswood", the "Company" or the "Group")

US Acquisition


Kingswood continues US expansion with second acquisition


Kingswood Holdings Limited (AIM: KWG), the ambitious integrated international wealth management company, today announces that, subject to US regulatory approval, it has agreed to acquire an 85% majority interest  in Chalice Capital Partners ("CCP"), an Independent Broker/Dealer (IBD) and Chalice Wealth Advisors ("CWA"), a Registered Investment Advisor ("RIA") located in San Diego, California (together with CCP, "Chalice") (the "Acquisition"). The total consideration for the Acquisition is US$4.0 million (circa £3.1 million), with an initial US$1.0 million (£.8 million) payable on completion of the Acquisition in the form of a promissory note, secured by the assets of Chalice, and the balance payable on a deferred basis subject to regulatory approval from FINRA and Chalice meeting pre-agreed asset migration, revenue, and EBITDA hurdles. The consideration represents a 6x multiple based on Chalice's projected FY2019 EBITDA. The 15% remaining interest in CCP and CWA will be retained by senior management.


To meet the initial payment and associated expenses, Kingswood will issue a total of 900,000 convertible preference shares ("New Preference Shares") under the terms of the convertible preference share subscription agreement announced on 12 September 2019, to HSQ INVESTMENT LIMITED ("Pollen Street"), a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital Limited.

The New Preference Shares represent the second tranche of convertible preference shares issued pursuant to the Pollen Street subscription agreement and as such the total number of Convertible Preference Shares held by Pollen Street is 5,727,655.

Chalice has experienced robust growth in the two years it has been operating with positive EBITDA and cash flow expected in FY19. In the most recent financial year to 31 December 2018, Chalice generated a small EBITDA loss of US$0.3 million (£0.2 million). Brokerage and fee based AUM has reached $1.15 billion (£0.9 billion) and the combined platform has 104 licensed representatives.  Formed in 2017, the principals of the firm are Keith Gregg and Derek Bruton. Derek oversaw the independent channel business for the largest IBD in the US - LPL Financial - adding over $1 billion (£0.8 billion) in gross revenue to the firm during his leadership. Derek will be the CEO of the acquired businesses going forward.


CCP and CWA are run on a lean centralised platform without large existing and expensive operational infrastructure. CCP and CWA are well-positioned to add fixed and variable expenses as the business expands and can closely manage profitability and cash flow growth. Kingswood plans to use CCP and CWA as one of its centralised hubs, providing a platform for future acquisitions and product offerings in the US.


Gary Wilder, Kingswood's Group CEO, said: "We're delighted to announce our second acquisition in the US, following on from Manhattan Harbor earlier this year. The advantages of this new West Coast hub are that it is immediately earnings accretive with a strong management team that has significant experience in roll-up and consolidation strategies. Derek's experience and understanding of how to scale a business and source and manage superior talent will be instrumental to our success. The Acquisition complements the Group's strategy of seeking new distribution channels for its expanding products."


Kingswood will further focus its attention on acquisition targets with revenues in the $5 million to $50 million range, a sub-market in which Kingswood's capital strength and international narrative will create a differentiated, competitive presence.


Derek Bruton, President of the Chalice platform commented: "I am excited to be joining Kingswood and lead the next, exciting chapter of the Chalice growth story. Kingswood brings experienced management, deep resources and expansion capital to enable us deliver quality, holistic wealth management services to American clients. I couldn't be happier to work with the Kingswood team on this global growth journey".


US wealth management sector overview


The US retail wealth market is large and remains fragmented. The total market size is estimated at $22 trillion (£16.9 trillion) with close to 315,000 advisors, with independent broker-dealers controlling circa $3 trillion (£2.3 trillion) AUA and employing 59,000 advisors. This provides Kingswood with a significant opportunity for consolidation with many of these smaller broker dealers in desperate need of a capital injection and support to enable them to survive against ever increasing regulation costs and competition. 


The overall retail wealth management sector is experiencing substantial growth due to an aging population with excess disposable income, overall wealth accumulation, and an increased demand for financial advice. The independent channels (IBDs, and Hybrid IBDs/RIAs) are ripe for further consolidation with several trends creating favourable tailwinds. Smaller IBDs and Hybrid RIAs are generally poorly capitalised, especially in the face of additional technology, regulatory and compliance burdens.  The independent advisor model remains very attractive, especially if affiliated with better capitalised holding company platforms like Kingswood that can support independent advisors while maintaining high levels of autonomy and ownership of the client relationships.


Najib Canaan, the US CEO for Kingswood said: "Wire houses or full-service broker-dealers have been facing pressure from increasing regulatory and transparency requirements and continue to reduce pay-out rates, essentially creating "salaried advisors". This has led to an increasing number of advisors looking to exit these firms for IBDs enabling them to have more control over their books and the potential for increased compensation. This presents a major opportunity for Kingswood to attract these sophisticated, highly trained advisors. Kingswood is ideally placed to capture these quality IBD's and RIA's, such as Chalice, providing the support they need to utilise these market opportunities."




For further details, please contact:

Kingswood Holdings Limited

+44 (0)20 7293 0730

Gary Wilder / Patrick Goulding


finnCap Ltd (Nomad and Broker)

+44 (0)20 7220 0500

Scott Mathieson / Anthony Adams - Corporate Finance

Tim Redfern / Richard Chambers - ECM

Greentarget (for media)

Jamie Brownlee / Alice Gasson / Ellie Basle 

+44 (0)20 7324 5498

[email protected]



About Kingswood

Kingswood Holdings Limited (trading as Kingswood) is an AIM-listed (AIM: KWG) integrated wealth management group, with on closing of the WFI acquisition around 5,500 active clients and c. £2.5 billion of Assets under Management and Advice. It has a growing network of offices in the UK including Abingdon, Beverley, Derby, Lincoln, London, Maidstone, Sheffield and Worcester, and offices in Johannesburg, South Africa and New York, USA.

Kingswood offers a range of trusted investment solutions to its clients, which range from private individuals to some of the UK's largest universities and institutions, including investment advice and management, personal and company pensions and wealth planning.  Kingswood is focused on becoming a leading player in the wealth management market through targeted acquisitions in the UK, with the ultimate goal of creating a global business through strategic partnerships. In May this year, the firm acquired a strategic stake in US-based, Manhattan Harbor Capital Inc.

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.

Quick facts: Kingswood Holdings Limited

Price: 26

Market: LSE
Market Cap: £56.4 m

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