Shore Capital Group is an independent investment group with three main areas of business: Capital Markets, Asset Management and Principal Finance (on-balance sheet investments). It has offices in Guernsey, London, Liverpool, Edinburgh and Berlin.
Shore Capital has agreed to acquire Stockdale Securities which has 41 employees, 53 small and medium-sized corporate clients and dealing relationships with 200 institutional clients. The initial cash consideration is £4.9m with a maximum deferred payment of £4.0m subject to revenue targets. The price to book and earnings multiples to be paid (FY18 numbers) would be 1.6x and 7.5x, even on the maximum potential payment. The enlarged group will benefit from scale, increased client diversity and, we assume, some cost synergy. Given successful integration, the deployment of part of Shore’s available capital into an operating activity should benefit both returns and the valuation.
Increased equity market volatility has created a more challenging background for SGR and particularly for Capital Markets with potential delays in equity issuance and M&A activity. Nevertheless, activity continues and the Stockdale acquisition should be enhancing. A resolution of some of the macro uncertainties could prompt a bounce-back in corporate activity. Asset Management appears well positioned to grow further and is looking to use its track record in private client tax-efficient products for institutional investors.