Wealth manager announces acquisition closure as part of US growth strategy

International wealth management company Kingswood Holdings, with offices in Manchester’s Spinningfields, is ramping up its interests in the US market.

It confirmed the formal closing of its Chalice acquisition, announced last December, and that it has signed conditional heads of terms to assume majority ownership in Manhattan Harbor Capital.

These businesses will be rebranded Kingswood US and put the company in a strong position to drive its US growth strategy.

Kingswood sees the US as a major growth opportunity.

The market is still growing significantly year-on-year, with nine per cent compound historical annual growth.

By the end of 2025, it is estimated the North American market will be worth in excess of £57 trillion.

Kingswood has been keen to expand investment in that market for some time. The firm’s intention is to drive its US growth strategy through the rebranded merged company, Kingswood US.

The growth strategy envisages organic growth, significant recruitment of registered advisors and acquisitions and a substantial build out of its investment banking franchise. The Kingswood US client offering is expected to be attractive to registered advisors.

On completion, Kingswood will have around 180 authorised representatives managing assets under management (AUM) of approximately £1.6bn in the US.

Following today’s announcement Kingswood now owns an 85% interest in Chalice Capital Partners and Chalice Wealth Advisors.

Chalice Capital Partners is an independent broker/dealer and Chalice Wealth Advisors is a registered investment advisor, both located in San Diego, California, and provide full service securities brokerage, advisory and investment banking services to a broad-based group of individuals and corporate clients.

Chalice currently has 96 authorised representatives managing assets of around £900m.

The maximum consideration for 100% of Chalice is £3.2m and initial consideration of £800,000 was paid on exchange in December 2019.

Following regulatory approval and closing, the second tranche of £800,000 has now been paid by Kingswood. The maximum remaining balance of £1.6m will be disbursed on a deferred basis in 2020 subject to Chalice meeting pre-agreed asset migration, revenue and EBITDA hurdles.

To finance the second tranche Kingswood has issued a total of 869,000 new convertible preference shares.

Subject to due diligence, regulatory approval and completion, Kingswood will exercise its existing option to increase its interest in Manhattan Harbor Capital (MHC) from the existing seven per cent to 20%.

Kingswood has signed detailed heads of terms with MHC, which will lead to the business increasing its current seven per cent stake to 50.2%.

Chalice will be folded into MHC, increasing Kingswood’s interest in MHC to a majority 50.2%, and MHC will be renamed Kingswood US, the business that spearheads the company’s future US strategy.

Kingswood group chief executive, Gary Wilder, said: “The heads of terms to acquire a majority interest in MHC at an attractive discount relative to market reflects the desire of both parties to develop a highly accretive global platform providing clients access to investment product and services in major US and UK markets.

“Kingswood’s enhanced investment in MHC will cement a key, strategic foothold in the largest global wealth and investment management market, differentiate us from our peers and support our aspirations of asset linking and cross-selling services.

“The investment will provide a significant base to potential further integration and a valuable support to Kingswood’s US expansion plans.

“This puts us in a strong position to execute our robust US acquisition pipeline.

“The partnership also helps MHC achieve its goal of formalising a strategic allegiance with the Kingswood listed entity that brings a number of benefits including boosting AUM and accelerating adviser recruitment and a significant foothold in the largest wealth management market globally, providing the springboard and best in class infrastructure to exponentially grow the business.”

MHC is the owner of Benchmark Investments, a FINRA-registered independent broker/dealer based in New York and Atlanta, run by Mike Nessim who is also the current controlling shareholder, providing full service securities brokerage and investment banking services to a broad-based group of individuals and corporate clients.

For the nine months ended December 31, 2019, MHC reported EBITDA of £900,000, total assets of £1.1m and AUM of around £280m.