ALPHA Financial Markets Consulting, a strategic adviser to asset management firms, is to float on the stock exchange, bringing its short ownership by Edinburgh-based investment house Dunedin to a close.
The company, whose clients include Standard Life Aberdeen, Artemis and Martin Currie, aims to raise about £150 million via an initial public offering on the Alternative Investment Market, it revealed yesterday. With investor roadshows taking place this week, the company is targeting a listing of October 11.
A successful IPO would take Alpha Financial Markets Consulting (FMC), which was established 30 years ago, into the public markets after two spells under private equity owners.
Alpha FMC was acquired in October 2013 by Baird Capital, the private investment arm of Robert W Baird & Co. That deal is understood to have valued the business at £28m. Baird exited two years later when Dunedin made a “significant investment” in Alpha FMC in a deal valued at £80m. Dunedin swooped following a period of rapid growth at Alpha FMC, with profits growing to more than £8m in 2016 from £2.3m in 2013. At the time, Alpha FMC employed about 200 consultants with about 130 wealth and asset management clients.
Euan Fraser, the Scottish chief executive of Alpha FMC, said he first approached Dunedin over the possible float earlier this year. And he declared the stock market is “ultimately the right home for us”, stating the move will allow the company to “deliver growth in new areas, new geographies and continue to be successful in the asset management space”.
Mr Fraser said: “The private equity structure has worked well for us, but it does mean in a public environment we will be coming to market debt free. We will be using the [cash] raising to pay off all of our debt. For a business like ours, we don’t really need to have much debt at all; we’re highly cash generative and going forward we will be paying that cash out – 50 per cent of post-tax profits will be paid [in] dividends.”
Mr Fraser added the float would put Alpha FMC, which has five staff in the Edinburgh office it opened earlier this year, in a position to make acquisitions.
Asked whether Dunedin would be retaining a stake in the business, Mr Fraser said the advice he has been given is to “keep it clean”.
It is hoped the IPO will put 80 per cent of the Alpha FMC shares in “free float”, which Mr Fraser said would make it more attractive to investors.
“From a Dunedin perspective, they are private equity firm. Their specialism is helping support management teams in a private environment, not in a public environment,” he added.
Mr Fraser said the UK’s impending divorce from the European Union (EU) did not come into the directors’ thoughts as they planned the IPO.
He admits the uncertainty caused by Brexit is a concern, but he said that, with offices in Paris, Luxembourg and The Netherlands, Alpha is well positioned to capitalise on the continuing growth of the asset management sector across the EU.
“I think Brexit will create some uncertainty in the future, and it does now unfortunately,” he said.
“It is still unknown – none of us know what Brexit is ultimately going to mean. Until we do, it is difficult to know what the impact will be.
“What is more important for us is that the growth in asset management is going to continue.
“There are so many different demands, [for example] planning for retirement, life assurance etc. that the growth in AUM (assets under management) will, without a doubt, continue.”
“If we’re servicing that from Paris or from Luxembourg, or from London, I think we will still be the beneficiary of that underlying growth in our market place. Brexit is maybe less impactful for us than it may be for other companies that don’t have a European base.”
Dunedin said in a statement: “Dunedin Enterprise Investment Trust PLC is pleased to announce Alpha a portfolio company held via Dunedin Buyout Fund III LP has today announced its intention to float on the AIM market of the London Stock Exchange.”
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