TIDMAFM

RNS Number : 3479Z

Alpha Fin Markets Consulting plc

20 May 2021

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES AT THE OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

20 May 2021

Alpha Financial Markets Consulting plc

Acquisition of Lionpoint Holdings, Inc.

Introduction

Alpha Financial Markets Consulting plc (AIM: AFM) ("Alpha FMC", the "Company" or, together with its subsidiary undertakings, the "Group"), a leading global provider of specialist consultancy services to the Asset Management, Wealth Management and Insurance industries, announces that it has today entered into an agreement to acquire the entire issued share capital of Lionpoint Holdings, Inc. ("Lionpoint"), a US-based provider of specialist consultancy services to the Alternative Investment industry, on a cash free, debt free basis for a total amount (payable over four years) of up to US$90 million (GBP63.8 million) in a combination of cash and new Alpha FMC shares (the "Acquisition").

The maximum total cash payable by Alpha FMC under the Acquisition is US$73.6 million (GBP52.2 million), which will be funded from the Group's existing cash reserves and the proceeds of a placing of new ordinary shares in the Company, representing up to 9.0 per cent. of Alpha FMC's issued share capital to raise up to approximately GBP31 million (before expenses) (the "Placing"). Of this cash amount, US$34.5 million (GBP24.5 million) becomes payable on completion of the Acquisition. The Placing is being conducted through an accelerated bookbuilding process which will be launched immediately following the release of the Placing Announcement. Joh. Berenberg, Gossler & Co. KG ("Berenberg") and Investec (as defined below) are acting as the Company's joint bookrunners (Berenberg and Investec together, the "Joint Bookrunners") in connection with the Placing.

Acquisition highlights

-- Acquisition of a leading US-based provider of strategy, technology and operations consultancy services to the Alternative Investment industry.

-- Strong strategic rationale in line with Alpha FMC's stated growth strategy, with the Acquisition significantly increasing both the Group's exposure to the attractive and fast growing Alternative Investment market and its footprint in the large and strategically important North American market.

-- Highly complementary service offering and blue chip client base, broadening the Group's capabilities in the rapidly growing Alternative Investment client segment and providing an attractive opportunity to expand the range of services provided to the combined client base.

-- Strengthens the Group's technology-focused consulting service proposition, bringing a number of additional key vendor partnerships.

   --    Lionpoint has a strong track record of revenue and EBITDA growth at attractive margins. 

-- Strong alignment with Alpha FMC's culture, with Lionpoint's existing management team committed to remaining with the business underpinned by the structure of the transaction.

The Acquisition is expected to be significantly accretive to the Company's earnings in first financial year of ownership, and is expected to generate returns ahead of the Group's cost of capital at attractive margins.

Information on Lionpoint

Founded in 2014, Lionpoint is a leading US-based provider of strategy, technology and operations consultancy services to the Alternative Investment industry. The business is headquartered in New York, with six offices across New York, Denver, San Francisco, London, Geneva and Sydney and over 100 consultants from industry, operations and technology backgrounds.

Lionpoint's core consulting services include strategic advisory services; operating model review and design; technology roadmap development; system selection, implementation and integration; data modelling and analytics; and project management. It has extensive experience transforming the front to back office operations of global alternative investment managers, advisors and investors. The business has a blue chip client base with over 125 clients across private equity, real estate and infrastructure managers, private debt and credit funds, limited partners, financial services firms and portfolio companies.

Lionpoint is a certified implementation partner for over 20 specialist key technologies and was awarded Europe's Best Technology Advisory Firm for 2021 by Private Equity Wire.

Lionpoint has an impressive track record of growth, delivering strong double digit revenue growth in the last two years, and average underlying EBITDA margins of 20.3 per cent. In the year ended 31 December 2020, Lionpoint reported (unaudited) revenue of US$30.1 million (GBP23.5 million) and adjusted EBITDA of US$6.9 million (GBP5.4 million). Lionpoint also benefits from strong cash flow generation. As at 31 December 2020,

Lionpoint             had net assets of US$5.5 million (GBP4.0 million). 

Strategic rationale for the Acquisition

Alpha FMC's strategic objective is to be recognised as the leading global consultancy to the Asset Management, Wealth Management and Insurance industries and specifically to double the business over the next four years through a focus on geographic expansion (particularly in North America), broadening the Group's service offering including into new vertical markets and expanding the Group's product and technology offerings. As previously indicated, the Group intends to execute this strategy, in part, through inorganic growth, recognising the benefits of increasing the breadth of the service offering and geographic coverage through selective, complementary acquisitions.

With this clear and focused strategy, Lionpoint represents a highly attractive acquisition for the Group and one which meets the Group's key strategic M&A criteria. Lionpoint's focus is on the Alternative Investment industry, which is one of the fastest growing segments in asset management and it provides Alpha FMC with a market-leading capability to service this rapidly growing market in both North America and internationally. It also significantly increases the Group's footprint and service offering in the large and strategically important North American market which is subject to the same long term structural growth drivers of increasing assets under management, regulation and cost pressure.

Lionpoint's blue chip Alternatives-focused client base is highly complementary to Alpha FMC's existing client base, with limited overlap. Accordingly, the Company expects that there will be opportunities to leverage the combined capabilities of both parties into the newly expanded client base. The Acquisition will also strengthen the Group's technology-focused consulting service proposition, bringing a number of additional key vendor partnerships to Alpha FMC and enhancing the Group's capabilities in this important area.

The Acquisition will also bring a highly experienced, entrepreneurial management team and add further management expertise and capability to the Group. The existing Lionpoint founders and management team, including Nick Moore and Jonathan Balkin (the "Founders"), will remain with the business going forward. More broadly, Lionpoint's high performance culture is closely aligned with Alpha FMC's, with managers and consultants strongly incentivised to identify and introduce new opportunities and to deliver high levels of client service.

Terms of the Acquisition

Lionpoint is majority owned by the Founders, with a minority investment held by Blackstone. The Acquisition has been structured to retain and incentivise the Lionpoint management team to deliver its growth strategy, with a management incentive plan being put in place on completion of the Acquisition for the wider Lionpoint management team.

The maximum cash and share amount payable by Alpha FMC under the terms of the Acquisition is US$90 million (GBP63.8 million), comprising a base amount of US$54.8 million (GBP38.9 million) and an earnout payable of up to US$35.2 million (GBP25.0 million), including payments pursuant to the management incentive plan.

Of these amounts, US$34.5 million (GBP24.5 million) becomes payable in cash on completion of the Acquisition ("Completion"), US$10.8 million (GBP7.7 million) becomes payable on the first anniversary of Completion, US$8.4 million (GBP6.0 million) becomes payable on the second anniversary of Completion and US$1.1 million (GBP0.8 million) becomes payable across the third and fourth anniversaries of Completion. 70 per cent. of the amount payable on the first and second anniversaries of completion will be paid in cash, with the balance in new ordinary shares in the capital of Alpha FMC ("Ordinary Shares"). The Ordinary Shares being issued under the terms of the Acquisition will be subject to customary lock ups for a period of up to three years following issue.

The earnout payments of up to US$35.2 million (GBP25.0 million) become payable in three broadly equal tranches in August 2022, August 2023 and August 2024 respectively, with 70 per cent. payable in cash and 30 per cent. in Ordinary Shares. Receipt of the earn out payments is subject to Lionpoint achieving escalating gross profit targets over the three year period. The earnout targets have been set at challenging levels and, to achieve the full earnout, Lionpoint would need to make a significant contribution to the Group's EBITDA over a three year period.

The maximum potential cash payable by Alpha FMC pursuant to the Acquisition, assuming full payment of the earnout, would be US$73.6 million (GBP52.2 million).

The Acquisition is unconditional and Completion will occur today.

The terms and conditions of the Placing will be set out in a further announcement immediately following the publication of this announcement. Berenberg and Investec are acting as Joint Bookrunners in connection with the Placing.

Financial effects of the Acquisition

The Company expects the Acquisition to be significantly accretive to earnings in first financial year of ownership and the Acquisition is expected to generate returns ahead of the Group's cost of capital at comparable margins to the Group. This statement is not meant or intended to be a profit forecast and should not be interpreted to mean that the earnings per share of Alpha FMC following completion of the Acquisition will necessarily be above or below the historical published earnings per share.

Commenting on the Acquisition, Euan Fraser, Alpha FMC's CEO, said:

"We are delighted with the acquisition of Lionpoint, which is a fantastic addition to our Group and aligns strongly with Alpha FMC's stated strategy of growing our capabilities in the rapidly-growing Alternatives Investment space and our footprint in North America. Lionpoint brings a complementary, blue chip client base, a focus on leading technology solutions and key vendor partnerships, and a strong global management team aligned with Alpha FMC's own culture. The transaction is a significant step on our journey to doubling the business in four years, and we look forward to working with Lionpoint and growing our businesses together."

Commenting on the Acquisition, Nick Moore, Lionpoint's Co-Founder, said:

"On behalf of Lionpoint, Founders Nick Moore and Jonathan Balkin are delighted to be joining Alpha FMC and see this is an attractive and strategic next step in Lionpoint's development as an expanding global business. Our alternatives focus and position as a leading global consultancy in this space is highly complementary to Alpha FMC and as a management team we are excited to become part of such an innovative firm and one that shares our culture and values. "

Notes:

1. All acquisition terms are expressed in GBP calculated using the closing GBP/USD rate of 1.41 on 19/05/2021

2. Lionpoint's FY 2020 revenue and adjusted EBITDA are expressed in GBP calculated using the average GBP/USD rate of 1.28 for calendar year 2020.

3. Lionpoint's net assets as at 31/12/2020 are expressed in GBP calculated using the closing GBP/USD rate of 1.37 on 31/12/2020

Enquiries:

 
                                                     +44 (0)20 7796 
 Alpha Financial Markets Consulting plc               9300 
 Euan Fraser (Global Chief Executive Officer) 
  John Paton (Chief Financial Officer) 
 Investec Bank plc - Nominated Adviser, Joint        +44 (0)20 7597 
  Bookrunner and Joint Corporate Broker               4000 
 Patrick Robb 
  James Rudd 
  Harry Hargreaves 
 Berenberg - Joint Bookrunner and Joint Corporate    +44 (0)20 3207 
  Broker                                              7800 
 Chris Bowman 
  Toby Flaux 
  Alix Mecklenburg-Solodkoff 
                                                     +44 (0)20 3757 
 Camarco - Financial PR                               4980 
 Ed Gascoigne-Pees 
  Candice Adam 
 

About Alpha FMC

Alpha FMC is a leading global provider of specialist consultancy services to the Asset Management, Wealth Management and Insurance industries. With over 430 consultants across twelve offices spanning the UK, Europe, North America and Asia, Alpha FMC has the largest dedicated team in the industry. Alpha FMC has provided consultancy services to over 400 clients, including 85 per cent. of the 20 largest global asset managers by AUM and a range of other buy-side firms.

This announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section of this announcement.

IMPORTANT NOTICES

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE OR SUBSCRIPTION INTO THE UNITED STATES. THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION. NO PUBLIC OFFERING IS BEING MADE IN THE UNITED STATES.

This announcement may contain, or may be deemed to contain, "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company's profitability and ability to access capital and credit, a decline in the Company's credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this announcement by or on behalf of the Company speak only as of the date they are made. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Berenberg, which is authorised and regulated by the German Federal Financial Supervisory Authority and subject to limited regulation in the United Kingdom by the Financial Conduct Authority (the "FCA"), is acting exclusively for the Company in connection with the Placing and will not be acting for any other person and will not be responsible to any person other than the Company for providing the protections afforded to clients of Berenberg or for advising any other person in respect of the matters referred to in this announcement.

Investec Bank plc ("Investec Bank") is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the FCA and the PRA. Investec Europe Limited (trading as Investec Europe) ("Investec Europe"), acting as agent on behalf of Investec Bank in certain jurisdictions in the European Economic Area (together Investec Bank and Investec Europe hereinafter referred to as "Investec"), is regulated in Ireland by the Central Bank of Ireland. Investec is acting exclusively for the Company and no one else in connection with the Placing, and Investec will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Investec or Berenberg or by any of their respective affiliates, agents, directors, officers, consultants, partners or employees as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

No statement in this announcement is intended to be a profit forecast or estimate, and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

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