Kingswood Holdings Limited (AIM: KWG), the ambitious integrated international wealth management company, today announces that, subject to US regulatory approval, it has agreed to acquire an 85% majority interest in Chalice Capital Partners (“CCP”), an Independent Broker/Dealer (IBD) and Chalice Wealth Advisors (“CWA”), a Registered Investment Advisor (“RIA”) located in San Diego, California (together with CCP, “Chalice”) (the “Acquisition”). The total consideration for the Acquisition is US$4.0 million (circa £3.1 million), with an initial US$1.0 million (£.8 million) payable on completion of the Acquisition in the form of a promissory note, secured by the assets of Chalice, and the balance payable on a deferred basis subject to regulatory approval from FINRA and Chalice meeting pre-agreed asset migration, revenue, and EBITDA hurdles. The consideration represents a 6x multiple based on Chalice’s projected FY2019 EBITDA. The 15% remaining interest in CCP and CWA will be retained by senior management.

To meet the initial payment and associated expenses, Kingswood will issue a total of 1,157,500 convertible preference shares (“New Preference Shares”) under the terms of the convertible preference share subscription agreement announced on 12 September 2019, to HSQ INVESTMENT LIMITED (“Pollen Street”), a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital Limited.
The New Preference Shares represent the second tranche of convertible preference shares issued pursuant to the Pollen Street subscription agreement and as such the total number of Convertible Preference Shares held by Pollen Street is 5,985,155.

Chalice has experienced robust growth in the two years it has been operating with positive EBITDA and cash flow expected in FY19. In the most recent financial year to 31 December 2018, Chalice generated a small EBITDA loss of US$0.3 million (£0.2 million). Brokerage and fee based AUM has reached $1.15 billion (£0.9 billion) and the combined platform has 104 licensed representatives. Formed in 2017, the principals of the firm are Keith Gregg and Derek Bruton. Derek oversaw the independent channel business for the largest IBD in the US - LPL Financial - adding over $1 billion (£0.8 billion) in gross revenue to the firm during his leadership. Derek will be the CEO of the acquired businesses going forward.

CCP and CWA are run on a lean centralised platform without large existing and expensive operational infrastructure. CCP and CWA are well-positioned to add fixed and variable expenses as the business expands and can closely manage profitability and cash flow growth. Kingswood plans to use CCP and CWA as one of its centralised hubs, providing a platform for future acquisitions and product offerings in the US.

Gary Wilder, Kingswood’s Group CEO, said: “We’re delighted to announce our second acquisition in the US, following on from Manhattan Harbor earlier this year. The advantages of this new West Coast hub are that it is immediately earnings accretive with a strong management team that has significant experience in roll-up and consolidation strategies. Derek’s experience and understanding of how to scale a business and source and manage superior talent will be instrumental to our success. The Acquisition complements the Group’s strategy of seeking new distribution channels for its expanding products.”

Kingswood will further focus its attention on acquisition targets with revenues in the $5 million to $50 million range, a sub-market in which Kingswood’s capital strength and international narrative will create a differentiated, competitive presence.

Derek Bruton, President of the Chalice platform commented: “I am excited to be joining Kingswood and lead the next, exciting chapter of the Chalice growth story. Kingswood brings experienced management, deep resources and expansion capital to enable us deliver quality, holistic wealth management services to American clients. I couldn’t be happier to work with the Kingswood team on this global growth journey”.