Wealth management company AFH is looking to raise up to £20m ($25.3m, €22.2m) to fund its acquisition pipeline.
The UK-based financial planning firm said that the fundraiser will happen through the conditional placing of 4% convertible unsecured loan stocks each valued at £5,000.
A convertible unsecured loan stock (Culs) is a debt offering that is convertible into ordinary stocks of a company at a fixed price at a specific date or within a date range, following the its acquisition.
Those buying more than one Culs will have to do so in multiples of £5,000.
The placement will be administered by Liberum Capital and Shore Capital Stockbrokers.
The news follows swiftly on the heels of earlier reports that wealth manager Kingswood is looking to generate cash as it pursues £100m worth of acquisitions.
AFH said that the placing will be done through a bookbuild – which involves offerings shares for a short period of time, with little or no marketing.
Those interested in buying the Culs will have until 12pm on 11 July 2019.
However, the wealth manager said that the deadline could be pushed back or forward at its, or the placing agents’ discretion.
The interest rate for the Culs is set at 4% per annum and it will be paid out every six months in equal instalments, on 30 June and 31 December respectively.
Investors will be able to convert their investment into company stocks starting from 31 December 2019 up until 30 June 2024.
Any outstanding Culs will be paid out, including any interest accrued during the period, on 30 July 2024.
Acquisitions left and right
AFH has already completed 16 M&A deals over the past year including financial planner Hayburn Rock Group in January 2019.
It reported an 87% rise in profits before tax for the six-month period ending 30 April 2019, suggesting its strategy is bearing fruit.
“The market for acquisitions within the IFA sector continued to be buoyant and whilst some upward pressure on prices was seen in larger businesses, where competition from private equity and product providers has increased, we were able to close transactions at our traditional multiples and in line with our earn out model,” Alan Hudson, group chief executive at AFH, said in April.
International Adviser reported on 25 June that there are three key pressures pushing smaller advice firms to exit the market, with costs being a big factor.
“Our pipeline remains strong with a number of opportunities in due diligence and contract negotiations at the period end.
“While AFH has seen an increase to the average size of its acquisitions, the company also remains committed to providing an exit for retiring IFAs where our existing advisers can offer the full AFH service to the acquired client base,” Hudson added.