Broker finnCap is to acquire corporate finance house Cavendish and list the enlarged group on AIM early in December.
A specialist in small and medium-sized companies, Cavendish’s expertise in sales of businesses up to £500mln in value dovetails neatly with its own client base said Sam Smith, finnCap’s chief executive.
She added Cavendish would enable the broker to deliver sell-side M&A services to private and public companies, as well as add a debt advisory capability to its capital raising activities.
Cavendish was set up by former Tory party treasurer Lord Hurley thirty years ago, who will become the group’s executive deputy chairman.
“As a result of the combination with finnCap, we will considerably bolster the range of services we can offer clients, beyond our core M&A capability,” he said.
Veteran venture capitalist Jon Moulton acquired finnCap eight years ago.
Clear deal logic
Angus Grierson, managing director of LGB Corporate Finance commented: "There is a clear logic to the deal right now because the small-cap equity only broking model is tricky and particularly when, like now, we see lower volumes of capital raising on AIM and a fall-off in IPOs.
“Also MIFID II does not help. It completely changes the way in which the equity research business operates as it makes it more compliance intensive and restricts distribution.”
He added: "finnCap has tried to address this backdrop by extending its range of services before. The merger with Cavendish represents an interesting alternative approach. Cavendish is one of the leading UK boutique M&A houses and it will enable finnCap to offer private M&A as well as IPOs to corporate clients assessing exit options.
"The real key to the deal is whether they can successfully combine the two teams of brokers and M&A advisers respectively in order to effectively leverage the combined client base."
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