Kingswood Acquisition Corp., a SPAC sponsored by the major shareholders in British wealth management firm Kingswood Group and a sister company to Kingswood U.S., announced Tuesday that its special purpose acquisition corporation, or SPAC, successfully raised $115 million in its initial public offering. The firm plans to use proceeds from the public markets to invest in U.S.-based RIAs and wealth management firms.
Last month, Kingswood offered 15 million units, to raise $150 million. But after seeing investors’ declining interest in SPACs, the company lowered the amount to a more reachable goal, $100 million, according to executives. It hit its target and then moved to raise an additional $15 million.
The SPAC functions as a source of capital to acquire registered investment advisory and hybrid firms, and Kingswood executives say they are aiming for firms with billions in assets under management. According to rules around SPACs, the firm must invest in companies with a combined value of at least 80% of its assets within a certain time frame.
“Our first acquisition will be a very large, well-established, branded firm,” said Larry Roth, Kingswood Acquisition’s lead director and former CEO of Cetera Financial Group, declining to share any further details.
Kingswood Acquisition plans to move rapidly, “a three-to-five-year time horizon with an enterprise value which is north of $12 billion, which is north of $100 billion in AUM and an EBITDA which is circa $500 million. That’s the sort of target that we have within our strategy,” said Gary Wilder, the SPAC’s executive chairman and Kingswood Group’s CEO who is based in London.
The SPAC’s pipeline includes 50 plus firms with $10 billion in AUM or more valued at $500 million or more; 25 with $20 billion plus in AUM valued around $1.5 billion; and 10 enterprises with more than $35 billion in AUM that are valued at $3.5 billion or more, he said.
As the SPAC grows through acquisitions, it will build in “synergistic benefits from cost efficiencies, centralizing costs, improving technology and developing and expanding the service levels,” Wilder said.
Kingswood, Roth added, is looking for high-producing senior advisors who don’t want to cash out and lose their equity as they would with private equity firms. It would offer capital to grow, access to markets and long-term incentivization plans to lock-in senior-level management. Wilder said that the LTIP would be possible stock ownership and “related benefits.”
Kingswood dipped into the U.S. marketplace at the right time, according to Jeff Nash, CEO of Bridgemark Strategies, a mergers and acquisitions and advisor transitions consulting firm.
“This marketplace is still incredibly fractured, and a fractured marketplace means there’s room for consolidation,” he said.
There are nearly 13,000 RIAs serving 43 million clients in the U.S., according to the Investment Advisor Association and NRS. More than 3,000 of those firms have $1 billion plus in assets under management.
Nash said he is not aware of any other SPAC’s in the wealth management space and wasn’t sure how advisors would interpret being acquired by a SPAC versus a private equity firm.
“I haven’t had to deal with that question yet,” he said. “I’m not sure how advisors are going to view it? Is it a benefit or is it a disadvantage?”
Once Kingswood Group satisfies its appetite for the U.S. marketshare, it has plans for wealth management markets in the U.K., Europe, Asia, South America and the Middle East.
The SPAC will be separate from Kingswood U.S., an RIA it started in the last half of 2019.
Kingswood Group took a minority stake in Manhattan Harbor Capital and later purchased Chalice Wealth Partners and Chalice Capital Partners, an independent broker-dealer and a registered investment advisor, from Keith Gregg, owner of Chalice Financial Network. On Monday, Kingswood Group announced it had folded the IBD and RIA into Manhattan Harbor Capital, giving it majority ownership (50.1%) of Manhattan Harbor.
Kingswood U.S. has 180 advisors, a staff of 15, $30 million in top-line revenue and is headed by Derek Bruton, the former president of the Chalice RIA and IBD turned CEO of Kingswood US. Kingswood US also includes an investment bank for small-and-medium sized businesses seeking financing.