Advisory services firm finnCap has issued a buy recommendation for private equity-backed UK and US advice consolidator Kingswood.
The firm's research report said that, since David Lawrence joined the business as UK chief executive in December 2020, the UK business has significantly increased its acquisition activity as well as introducing a strong integration capability, organic growth credentials and a focused investment in client centricity and its colleague proposition.
The same impact has been seen under Mike Nessim's leadership of the US business, the firm said, which has seen a rapid organic onboarding of new broker dealers and transformative revenues from this and its investment banking activity.
"Most notably Kingswood acquired IBOSS, a leading provider of managed portfolio services and other investment solutions on both an advisory and discretionary basis to UK IFAs, which has over 6,000 clients with over £1.4 billion of AUA/M. The opportunity created with the IBOSS deal creates an open market distribution capability and a curated acquisition pipeline of IBOSS firms who [sic] may wish to discuss a possible exit."
finnCap's report suggested the firm had the potential to deliver around £20m EBITDA and should hold a target share price of 39p. Kingswood has seen its share price rise to 28.5p in recent weeks.
The AIM-listed firm had completely transformed itself within the space of just a few years, according to finnCap.
Buying spree
Earlier in February Kingswood acquired Aim Independent, taking its UK advice team to 94 personnel.
The firm's fourth purchase in 2022 took its UK funds under advice/management to more than £7.2bn from around 19,300 active clients. Assets under administration (AuA) will total over £9.1 billion from a combination of both global retail and institutional clients.
The acquisition followed the 2022 takeovers of South Yorkshire firms D.J. Cooke Financial Planning and Allots Financial Services in January, and the purchase of Essex-based Joseph R Lamb in early February in a deal worth up to £15.3m.
To date, Kingswood has been provided growth equity of £77.4m by Pollen Street Capital to support the consolidator's existing and future acquisitions.
David Lawrence, UK CEO at Kingswood, said: "My ambition for Kingswood is to become a leading wealth management advisory and investment management business, breaking the £7bn AUA/M mark is a huge signal to that as we continue to grow our geographical footprint across the UK."
finnCap's report also highlighted that Kingswood has benefited from the wider sector offering long-term growth characteristics. This is supported, it added, by demographic trends, the requirement to provide for retirement, as well as the complexity of legislation, regulation and consolidation of a fragmented sector. Additionally, there will be an ongoing convergence of investment management and financial planning, with holistic financial planning and advice becoming central to the overall client proposition, the advisory firm said.
finnCap added that investors can benefit from the potential for outsized returns, outperforming any existing publicly listed wealth management model, whether driven by consolidation or otherwise.
"Kingswood now has the potential to harvest the results of increasing scale from a low base within a growth market and implement this rapidly across global markets, in the first instance in the UK and US."