Kingswood announces further US investment

  • Kingswood takes another giant step in US expansion strategy
  • Definitive agreement to acquire majority 50.1% interest in Manhattan Harbor Capital
  • Manhattan Harbor Capital to be renamed Kingswood US
  • Funded the first deferred consideration payment for Chalice, the business is to be folded into Kingswood US, subject to regulatory approval
  • Subject to Kingswood approval, up to $8.0 million (£6.1 million) additional capital to be invested to support further substantial US organic growth

On 5 May 2020, Kingswood Holdings Limited (AIM: KWG) announced the formal closing of its acquisition of Chalice Capital Partners and Chalice Wealth Advisors (together “Chalice”), the planned increase in Kingswood’s interest in Manhattan Harbor Capital (“MHC”) from 7% to 20%, and the plan to contemporaneously fold Chalice into MHC, increasing Kingswood’s interest in MHC to above 50%.

Kingswood today announces that, subject to regulatory approval, it will achieve this majority ownership in MHC.

This will be achieved by acquiring a further 4% of MHC prior to the fold in of Chalice, taking the pre-combination holding to 24%. Kingswood has then agreed to contribute its existing Chalice platform (with its businesses now renamed Kingswood Capital Partners and Kingswood Wealth Advisors) into MHC at a valuation of $4.0 million (£3.1 million). This is subject to FINRA regulatory approval. A minimum of $1.1m (£0.8 million) additional capital will be funded into MHC at closing taking Kingswood’s interest to 50.1%.

MHC will be rebranded Kingswood US and provides the Group with a strong, robust and well-capitalised foundation to accelerate its US growth strategy including best in class, full service operational and technology infrastructure.

Subject to approval, the Company intends to contribute up to $8.0 million (£6.1 million) of additional growth equity to further build US distribution channels through active adviser recruitment and acquisitions. If all capital is approved and fully deployed, the Kingswood Group is projected to own approximately 67% of the integrated Kingswood US financial services platform.

Kingswood US comprises strong Independent Broker Dealer (“IBD”) and Registered Investment Adviser (“RIA”) businesses across the US with key hubs in Atlanta, New York and San Diego. In addition it incorporates Kingwood Capital Markets, a national Investment Banking platform now supported by significant regulatory capital to leverage our expanding distribution channels and drive growth across equity and debt advisory and capital raising and M&A.


Completion will be achieved as follows:

  • The Company has exercised its call option and increased its interest in Kingswood US from an existing 7% to 20% for a consideration of $950,000 (£725,000).
  • It has further acquired an additional 4% interest in Kingswood US for a consideration of $488,000 (£372,000), taking the Kingswood Group’s interest today to 24%.
  • Subject to FINRA regulatory approval, the Company will contribute Kingswood Capital Partners (IBD business) and Kingswood Wealth Advisors (RIA platform) (formerly Chalice) into Kingswood US at a valuation of $4.0 million (£3.1 million).
  • Contemporaneous with these contributions, Kingswood will make a capital injection of $1.1 million (£0.8 million) into the combined Kingswood US business, increasing the Group’s interest to 50.1%.
  • Kingswood has further plans to invest, subject to approval, up to $8.0 million (£6.1 million) to fund organic growth and recruitment, as required by the business.


  • Mike Nessim will continue as the Managing Partner of the enlarged Kingswood US business.
  • On completion, Kingswood US is projected to have circa 180 Authorised Representatives, with key offices in New York, Atlanta and San Diego.

In summary:

Investment Date $’000 %
Initial investment in MHC  May 2019 525 7%
Exercise of option in MHC August 2020 950 13%
Additional investment in MHC August 2020 488  4%
Total Investment to date   1,963 24%
Contribution of Chalice * Expected 4Q 2020 4,000
Additional investment in Kingswood US Expected 4Q 2020 1,107
Total Investment at Closing   7,070 50.1%
 * Subject to regulatory approval
Further potential capital (post-closing)
Additional Investment in Kingswood US                         up to 8,000 17%
Total potential commitment 15,070 67%


To finance the immediate increase of its interest in Kingswood US to 24%, cover due diligence and acquisition related expenses, and fund the first contingent deferred consideration payment for Chalice, the Company has issued a total of [2,650,000] new convertible preference shares (the “New Convertible Preference Shares”), under the terms of its convertible preference share subscription agreement with HSQ INVESTMENT LIMITED, a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital Limited (“Pollen Street”).

The New Convertible Preference Shares represent the seventh tranche of irredeemable convertible preference shares issued pursuant to the subscription agreement and as such the total number of irredeemable Convertible Preference Shares held by Pollen Street has increased to [21,000,043] shares at an issue price of £1 each.

Gary Wilder, Group CEO at Kingswood commented: “We are absolutely delighted to increase our investment and finalise agreements to acquire a majority interest in the re-named Kingswood US. Mike and his team have continually shown that they are highly talented, best in class operators in the IBD, RIA space and the recently formed full-service Investment banking business, Kingswood Capital Markets. We intend to grow this business substantially, leveraging our growing US distribution franchise.  I have no doubt the capital we deploy will drive exceptional organic growth across the Kingswood US platform. This reflects the desire of both parties to develop a highly accretive global platform providing clients access to investment products and services in major US and UK markets.

Kingswood’s enhanced investment in Kingswood US will further cement a key, strategic foothold in the largest global wealth and investment management market, differentiate us from our peers and support our aspirations of asset linking and cross-selling services. This investment and intention to fund further growth equity is a major statement of intent regarding our US expansion plans and puts us in a strong position to execute our US strategy, supported by the in-place, operating and management platform. Mike and his team will oversee acquired entities and focus on delivering Kingswood US’s full-service brokerage, investment advisory and investment banking proposition to clients.”

Mike Nessim, Managing Partner of Kingswood US added: “This partnership with the Kingswood listed entity is beneficial in so many ways, and a major advantage in my strategy to boost AUM, accelerate adviser recruitment, continue to substantially build our investment banking business nationwide and achieve a significant foothold in the largest wealth management market globally. I am incredibly excited to be partnering with the Kingswood Group and exploring the many opportunities for our integrated broker dealer, advisory and investment banking platform. The potential is enormous, and we now have the backing to deliver the next phase of our ambitious business plan.”

Key Transaction Terms

Kingswood has now signed definitive agreements, subject to regulatory approval, to increase its current 7 per cent stake in Kingswood US (formerly MHC) to a majority 50.1% stake.

Kingswood US is the owner of Benchmark Investments (“Benchmark”), a FINRA-registered IBD based in New York and Atlanta, run by Mike Nessim who is also the current controlling shareholder, providing full service securities brokerage, advisory and investment banking services through Kingswood Capital Markets to a broad-based group of individuals and corporate clients.

When Kingswood originally purchased its current 7% Kingswood US interest in May 2019, it entered into a call option agreement permitting the acquisition of a further 13%. Kingswood has now exercised this call option for a total cash consideration of $950,000 (£725,000).

In addition, Kingswood has acquired an additional 4 per cent interest in Kingswood US for cash consideration of $488,000 (£373,000). The Company’s total interest in Kingswood US therefore now stands at 24%.

Kingswood and Kingswood US have also signed a binding agreement, subject to regulatory approval, for Kingswood to contribute 100% of its interests in Kingswood Wealth Advisors and Kingswood Capital Partners to Kingswood US at a consideration of $4 million (£3.1 million). These companies were acquired by Kingswood in May 2020 and comprise an IBD and RIA based in San Diego, run by Derek Bruton.

At closing, Kingswood will also inject a further $1.1 million (£0.8 million) cash into Kingswood US as additional growth equity to support its expansion strategy. On completion of the contribution and equity injection the Group’s total interest in Kingswood US will be 50.1%.


Transaction Rationale

As the largest global wealth management market, estimated to be worth $32.0 trillion (£24.4 trillion) as at 2018*, Kingswood sees the US as a major growth opportunity. The market is growing significantly year on year, with 9% compound historical annual growth. By the end of 2025, it is estimated the North American wealth management market will be worth in excess of $70.0 trillion (£53.4 trillion). Kingswood has been keen to expand investment in that market for some time.

Kingswood’s intention is to drive all of its US growth strategy through the rebranded merged company, Kingswood US. The growth strategy envisages organic growth, significant recruitment of Registered Advisors and acquisitions and a substantial build out of Kingswood Capital Markets, its investment banking franchise. The client offering is already proving to be attractive to Registered Advisors.

Benchmark is in the process of substantially expanding its platform and anticipates significant AUM and EBITDA growth once various investment acquisitions are formalised. With the combination of Chalice, Kingswood US will have circa 180 authorised representatives managing AUM of circa $1.7 billion (£1.3 billion) operating in a re-branded Kingswood US enterprise.

For the twelve months ended 31 July 2020, Kingswood US reported unaudited Revenue of $11.2 million (£8.5 million), EBITDA of $1.9 million (£1.5 million), total assets of $2.7 million (£2.1 million) and AUM of circa $500.0 million (£381.7 million).

On a pro-forma, unaudited basis for the year ended 31 July 2020, a 100% consolidated Kingswood US would have generated total Revenue of $24.2 million (£18.6 million), EBITDA of $2.3 million (£1.8 million) and AUM of circa $1.7 billion (£1.3 billion).

Derek Bruton, CEO of Kingswood US Holdings, said: “We’re delighted to announce Kingswood’s additional investment in Kingswood US. The contribution of Kingswood Wealth Advisors and Kingswood Capital Partners and the additional capital commitment provides us with a strong, robust national platform to grow and expand. We now have the advantage of major hubs in Atlanta, New York and San Diego operating under a centralised framework and a strong management team with significant experience in roll-up and consolidation strategies, which further reinforces the Group’s ability to grow global distribution channels for its expanding list of products.”

US Wealth Management Overview

The US retail wealth market is large and remains fragmented. The total market size is estimated at $22.0 trillion (£16.8 trillion) with close to 315,000 advisors, with IBDs controlling circa $3.0 trillion (£2.3 trillion) AUA and employing 59,000 advisors. This provides Kingswood US with a significant opportunity for consolidation with many of these smaller broker dealers in desperate need of a capital injection and support to enable them to survive against ever increasing regulation costs and competition.

The overall retail wealth management sector is experiencing substantial growth due to an aging population with excess disposable income, overall wealth accumulation, and an increased demand for financial advice. The independent channels (IBDs, and Hybrid IBDs/RIAs) are ripe for further consolidation with several trends creating favourable tailwinds. Smaller IBDs and Hybrid RIAs are generally poorly capitalised, especially in the face of additional technology, regulatory and compliance burdens.  The independent advisor model remains very attractive, especially if affiliated with better capitalised holding company platforms like Kingswood that can support independent advisors while maintaining high levels of autonomy and ownership of the client relationships.

Commenting on Kingswood’s US expansion Howard Garland, Partner at Pollen Street said: “We believe the US wealth management sector offers compelling opportunities for growth. Mike and his team have a clear strategy and we are excited to partner with Kingswood to deliver these goals. Pollen Street has extensive expertise in the global financial services sector, growing market leading companies organically and through acquisition. We believe our unique experience and skillset coupled with our capital commitment will enable Kingswood to accelerate implementation of their US strategy.”


*Source: PriceWaterhouseCoopers