Mattioli Woods plc Acquisition of Kudos

Mattioli Woods plc (AIM: MTW.L) is pleased to announce the acquisition of the entire share capital of TCF Global Independent Financial Services Limited ("TCF") and its subsidiary Kudos Independent Financial Services Limited ("Kudos") from its shareholders ("the Sellers") for a total consideration of up to £8.69 million, to be satisfied partly in cash and partly through the issue of 462,572 new ordinary shares of 1p each in Mattioli Woods.  The cash consideration is payable in part on completion and in part over the period of three years following completion, subject to certain earnings and revenue targets being met.  The initial cash consideration is being funded from the Group's existing resources and results in a cash outflow at completion of £2.40 million, including deal costs and net of estimated cash acquired in Kudos at completion. 

TCF is the holding company of Kudos, an employee benefits and wealth management business founded in 1991.  Based in Aberdeen, Kudos employs 45 staff with offices in Glasgow and London, providing advice to both high net worth individuals and companies on all aspects of financial planning.  Kudos' experienced management team will be retained by Mattioli Woods following the acquisition, which is expected to be earnings enhancing in this current financial year ending 31 May 2012. 

In the year ended 30 September 2010, Kudos generated a profit before taxation of £534,817 on revenues of £4,257,891.  At 30 September 2010 TCF's net assets (equivalent to Kudos' net assets at the same date) were £1,278,061.  The acquisition provides Mattioli Woods with a strong employee benefits proposition at a time when the introduction of the National Employment Savings Trust ("NEST") and auto-enrolment present clear opportunities.  In addition, Kudos offers the enlarged Group the opportunity to extend the provision of SIPPs to a wider audience and adds a specialist wealth management business to Mattioli Woods' existing operations. 

The total consideration consists of an initial consideration of £3.94 million, comprising £2.75 million in cash and 462,572 ordinary shares in Mattioli Woods ("the Consideration Shares", which are valued at £1.19 million based on the closing price of a Mattioli Woods share on 26 August 2011), plus deferred consideration of up to £4.75 million payable in cash in the three years following completion if certain financial targets are met based on growth in recurring revenues and earnings before interest, tax, depreciation and amortisation generated during that period.  Application for admission to AIM of these 462,572 new ordinary shares ("Admission") has therefore been made and it is anticipated that such Admission will occur on 1 September at 7.00 a.m. 

The Sellers have entered into a lock-in deed with Mattioli Woods and its nominated adviser and broker, Canaccord Genuity Limited, restricting sales of the Consideration Shares during the three years following completion. 

Commenting on the acquisition, Ian Mattioli, Chief Executive of Mattioli Woods, said:

"The acquisition of Kudos is an excellent cultural and strategic fit with Mattioli Woods, offering real synergies for both organisations.  These synergies include the ability to promote additional services to existing and prospective clients of each business.  We expect the enlarged Group to capture new business opportunities through our combined introducer networks.  In addition to extending our geographic footprint, the acquisition gives us the ability to offer our core SIPP, property and investment products to Kudos' clients and to offer enhanced employee benefits services to Mattioli Woods' clients and the wider market. 

"The Kudos team has a proven ability to win high-quality new business and the transaction gives us an exciting new distribution channel for Mattioli Woods' services.  I believe this will strengthen our position in a market in which I expect to see advice-led services at a premium.  This is an exciting step forward in the development of the Group as a broader wealth management business.  It is our ambition to continue expanding Mattioli Woods' operations both organically and by acquisition."

Jim Tennent, Chief Executive of Kudos, commented: 

"Joining the Mattioli Woods Group offers valuable opportunities for clients and employees in both organisations.  The enhanced scale of the business gives us the ability to provide additional value-added services to clients of both firms from "cradle to grave" and strengthens our holistic approach to the provision of wealth management and employee benefits advice."