Since the rebrand of European Wealth to Kingswood, the wealth management firm has embarked on an ambitious acquisition strategy in the UK market.
It has acquired six firms in the advice sector and agreed to buy Surrey-based IFA firm Regency Investment Services in September 2020.
Kingswood has the financial backing of investment company Pollen Street Capital and has no plans to stop its M&A strategy.
David Lawrence, UK chief executive at Kingswood, told International Adviser: “There’s a huge amount of opportunity to consolidate at all levels of size actually.
“Continuing to build and executing on a pipeline of acquisition opportunities is really important to us. In locations where we have less presence, we really want to establish hubs or anchors that we can then grow from.
“But equally, where we’ve already got a presence, finding opportunities to grow bolt-on businesses is equally appealing.
“We’re looking across quite a wide range of opportunities dependent on location. The strategy is very much to buy to give immediate scale, but then integrate and grow them organically from that point on, and it’s primarily through the organic growth that we get our return on investment.”
M&A market
Acquisitions in the advice market are not a rare occurrence. It is not surprising to hear of two or three deals a week in the UK.
Lawrence, who joined the firm from Schroders Personal Wealth, said: “The market is incredibly active and competitive, and it’s made up of principals that genuinely want to sell and others who are simply inquisitive.
“Most frequently, we are speaking to firms where the owners need some help to get to the next level, rid themselves of areas that get in the way of advising clients, and some that want to tap into our central investment expertise.
“I think the level of attention that the sector has got has meant a lot more people are inquisitive, perhaps more than they’ve been before.
“We’re speaking to a lot of people every week but it’s competitive and often challenging to get deals over the line.”
Covid impact
Rumours of fire sales in the industry sparked with the start of lockdown in March 2020, as companies felt the financial burn of the pandemic.
The activity in the market has been strong but Lawrence does not think “covid has changed people’s behaviours in terms of selling”.
“I think what covid has done is make business owners more principled in terms of their cost base,” he added. “The businesses that are coming on the market are leaner and more efficient, typically more than they were pre-covid. I think motives to sell are fairly unchanged.
“It’s typically been principals that want to create a capital event, perhaps de-risk their own inheritance because a lot of these businesses are focused around the individual, and if the individuals are no longer there, then the value isn’t the same as what it was.
“We’ve not seen an impact in the same way as perhaps has been reported elsewhere.”
Types of deals
All acquirers or consolidators engage with the M&A market in different ways.
Kingswood says it is looking “at each opportunity on a case-by-case basis”.
“I’m actually typically taking the first meeting with all of the opportunities that we get simply because I want to make sure that there’s that natural synergy, I’m looking for businesses that have got clients at the heart of it,” Lawrence said.
“I’m looking for people who want to stay around and grow the business with us as a partner.
“How the deal is constructed, such as asset purchase or share sale, will depend upon the opportunity, as will any earnouts and future incentivisation.
“I’m not going to suggest it’s a USP by any means, but I think what we are doing is slightly different to others in that we don’t have this fixed model. If I look at the firms that we’re speaking with, the deal structure is broadly a similar fit but actually finding the right synergy is what we’re looking for.
“Most firms want to do a share sale. I think most of the conversations that you go into have that expectation, but it’s not always the right thing to do.”
Academy
Kingswood isn’t only looking to grow via acquisitions. It does have organic growth plans as well.
The wealth manager launched its academy in January 2021 with four trainees.
Lawrence said: “We’re doing a lot of things similar to other firms. We’re taking people at different times of life, such as returners, second careerists and graduates.
“I think that’s important because it creates a footprint that’s not dissimilar to the client base that we’re serving.
“It’s amazing how people from different industries, whether it’s the armed forces or somewhere else, bring different perspectives and it’s important to match those with a more traditional recruiting method.
“It gives you a real richness of thought and approach. We must really be progressive and have people that reflect the society we’re serving, because otherwise we’ll end up being left behind.”
Growing trainee numbers
Lawrence has ambitious plans for the academy like the M&A strategy.
“We’d like to take another four probably in the late autumn,” he added. “If we could take four to eight a year over the next two or three years, that would give us a good succession.
“We’ll only do that if our business performance allows us to make that investment, but the current plan would suggest it does. I’d hoped that we could enlarge that academy and, of course, then the existing members of the academy would help the newer members.
“We’re not big enough to have a lot of classroom-led, remote academy type work. Therefore, they’re very much involved in the business and working alongside our wealth planners and our clients support teams, actually learning the job on the job.
“We want to grow, and to grow you need capacity. And so, when we buy businesses, we’re not typically buying a business with loads of capacity because the owner has kept it quite tight to the demand that they’ve got.
“The academy is one way of creating that capacity to allow us to then push demand and grow organically as opposed to through acquisition.”
