Alpha FMC Acquisition of Shoreline Consulting
Alpha FMC has completed the acquisition of Shoreline Consulting Pty Ltd and Shoreline Consolidated Pty Ltd (Shoreline), strengthening its position in the asset and wealth management (AWM) sector in the Asia Pacific (APAC) region. The acquisition is expected to be earnings-enhancing in the year ending 31 March 2024. We have updated our forecasts and valuation based on the announcement, and we maintain a "suitable" investment rating for Alpha FMC.
Acquisition Overview
Alpha FMC's acquisition of Shoreline, a boutique consultancy specialising in the AWM industry in the APAC region, represents a strategic move to expand its presence and strengthen its expertise in this rapidly growing market. Shoreline is headquartered in Sydney, Australia, and was founded in 2009 with the goal of guiding AWM firms in the APAC region through strategic transformation programmes. The company boasts a 19-person strong team with a wide-ranging client network spanning the region.
Shoreline's core capabilities include product and distribution, operations and outsourcing, data and analytics, and digital and technology consulting expertise. These strengths, combined with its complementary client base and company culture, make it a valuable addition to Alpha's existing offerings. The acquisition also presents a strong strategic rationale for Alpha, as it solidifies the company's position as the leading specialist AWM consulting firm in the APAC region.
The transaction terms include an initial cash consideration of A$8.0mln (£4.2mln), payable in three instalments upon deal completion and the following two completion anniversaries. Additionally, there is a performance-driven earn-out mechanism of up to A$5.0mln (£2.6mln) designed to maximise growth and align management incentivisation. The longstanding management team at Shoreline will remain with the business post-acquisition, ensuring a smooth integration and continuity of service for clients.
Updated Forecasts
Following the acquisition announcement, we have updated our forecasts for the financial year ending 31st March 2024. Revenue: £234.00mln (previously £230.00mln), an increase of 1.74%; gross profit: £84.44mln (previously £83.00mln); EBITDA: £47.50mln (previously £47.00mln); and adjusted EPS: 28.40 pence (previously 28.00 pence).
Valuation
We have upgraded our valuation based on the updated forecasts. We now anticipate an investment return of 81% over the next five years, equating to an annual return of 13%. Accordingly, a £100,000 investment in Alpha FMC is projected to yield £181,000 in five years.
Risks
The risk associated with an investment in Alpha FMC has been adjusted slightly lower, with shares having an adjusted beta that is 11% above the market (previously 14%).
Year end Mar 31 · 2021 · 2022 · 2023 · 2024
Revenue (£mln) · 98 · 158 · 222 · 234
Gross Profit (£mln) · 35 · 59 · 80 · 84
Adj. EPS (GBp) · 15.0 · 21.0 · 27.0 · 28.4