Deal in Focus: Dunedin reaps 55% IRR from Alpha IPO

Kenny Wastell
11 October 2017

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The ТЃ163m flotation of Dunedin-backed Alpha Financial Markets came earlier than the GP had originally planned and resulted in a 55% IRR. Kenny Wastell delves into the listing of the asset and wealth management consultancy

Dunedin-backed asset and wealth management consultancy Alpha Financial Markets Consulting has floated on the London stock exchange with a market cap of £163m.

The flotation consists of 22 million new and 56.4 million existing shares valued at a combined £125.4m. It raised an additional £35.2m for the company, which intends to use the fresh capital to pay down all its existing debt facilities and to pay for fees associated with the placing.

The listing marks a full exit for Dunedin, which generated £89.6m from the transaction just 20 months after it acquired the company in a secondary buyout, equivalent to an IRR of 55%.

"It was not our original plan to look for an early IPO," says Dunedin partner Mark Ligertwood. "We were looking at a more traditional three- to four-year holding and all exit options were on the table. But the reasons for floating the company early were almost entirely internal. We had implemented the key changes: consolidating our position in the US, opening an office in Singapore and developing the European market a little further by opening an office in Geneva."

Most of the presentations the team conducted to the fund management community were to people with whom they had worked in the past or were likely to work with in the future" – Mark Ligertwood, Dunedin

Founded in 2003 and headquartered in London, Alpha provides consultancy services to asset and wealth managers, as well as their third-party administrators. Baird was the first institutional fund manager to invest in the business, purchasing a minority stake in October 2013 in a deal valuing the business at £28m, according to unquote" data. Dunedin then acquired Alpha from Baird in February 2016, in a deal worth £80m. The GP drew capital from its third buyout fund, which held a final close on £300m in June 2013, in order to support the transaction, while debt was supplied by Lloyds Bank Commercial Banking and Beechbrook Capital.

Alpha has primarily expanded via an organic international growth strategy over the last six years, with increasing market demand for its blend of consultancy and benchmarking data in response to regulatory changes and cost pressures. Under Dunedin's 20-month tenure it opened offices in Edinburgh and Boston, in addition to the aforementioned operations in Geneva and Singapore. These new offices added to its existing locations in London, Paris, New York, The Hague and Luxembourg. The business also acquired Germany-based software company Track 2, with which the company had previously worked.

The company's turnover increased from £6.7m in the year ending March 2011 to £43.6m in the year ending March 2017, with adjusted EBITDA growing from £2.16m in 2012 to £8.55m in its most recent financial year.

Ahead of time
"Once we had implemented the strategy we started to consider exit options," says Ligertwood. "The reason an IPO became a compelling option was largely to do with the nature of the business, which supplies back-office services to the largest fund managers around the world. Most of the presentations the team conducted to the fund management community were to people with whom they had worked in the past or people they were likely to work with in the future."

Ligertwood adds that another key element behind pursuing a listing instead of a trade sale was Alpha's culture and "fiercely independent" history. "They originally set themselves up as a contrasting offering to larger consultancy firms," he says. "A match could perhaps have been found with a potential trade buyer, but securing the correct cultural fit would have been challenging. The other obvious option would have been another private equity transaction, but it was decided that a flotation provided the best exit route in terms of maintaining that culture."

Grant Thornton and Berenberg advised Alpha in connection with the listing.

People
Dunedin – Mark Ligertwood, Oliver Bevan (partners); Andrew Davidson (assistant director).
Alpha Financial Markets Consulting – Euan Fraser (CEO).