Pollen Street Group (POLN), the private assets group that merged with the Honeycomb debt fund two years ago, has struck a £432m deal to buy financial adviser group Mattioli Woods. 

AIM-listed shares in Mattioli Woods (MTW) have tumbled in the past two years today but jumped by a third today as the group recommended shareholders accept a 804p a share cash offer.

Leicester-based Mattioli Woods has £15bn in assets under management, including in fund arm Amati, and 20,000 clients. It recorded revenues of £111m in the financial year ending 31 May 2023.

The purchase will be funded by a mix of equity and debt, according to a stock market announcement. 

‘The Mattioli Woods directors believe the acquisition provides an attractive offer for Mattioli Woods shareholders, while also presenting an opportunity to accelerate Mattioli Woods’ vision to achieve continued growth across its core pillars of advice, investment and administration,’ the company said in its announcement. 

Mattioli Woods’ largest shareholder is Octopus Investments, which owns 14.1% of its shares. Other major shareholders include Liontrust and Gresham House. Chief executive Ian Mattioli (pictured above) is the fifth-biggest shareholder, owning 6% of the shares (see graph below). 

Lindsey McMurray, managing partner of Pollen Street Capital, which is now classified as an investment manager and not an investment company, said going private ‘would enable Mattioli Woods to accelerate its growth strategy and capitalise on the market opportunity in UK wealth management’. 

The statement suggests an acquisitions drive could be underway.

‘The Mattioli Woods directors see scale as an important element of success in the current environment,’ it said. ‘While Mattioli Woods has significant capital headroom from a regulatory capital perspective and for funding small bolt-on acquisitions, there is not enough surplus to fully deliver on Mattioli Woods’ M&A [merger and acquisition] pipeline. 

‘In addition, it is the view of the Mattioli Woods directors that the public markets no longer afford Mattioli Woods the financial flexibility to enable it to pursue its M&A strategy given the share price challenges the group has faced recently. At Mattioli Woods’ current share price, an equity fundraise would likely be highly dilutive.’ 

Mattioli Woods’ shares have dropped significantly over the past two years, starting this month down more than 35% from the start of 2022. 

Pollen Street Capital also invests in wealth firm Kingswood, but there was no mention of any merger of the two businesses. The private equity house is due to become a majority shareholder in Kingswood later this year under the terms of the £80m in growth financing it gave the company, according to previous announcements. 

Kingswood, which is also listed on AIM, has seen its shares drop 67% over the past 12 months. Last month it took on fresh debt from Pollen Street at a rate of 12%. Pollen Street shares were unchanged at 550p.

Edinburgh fund group Amati has been 49%-owned by Mattioli since 2017. 

The deal, which is awaiting shareholder and regulatory approval, takes the number of advice firms in the UK owned by private equity up to 37.