Buyout group Cinven is considering selling a stake in wealth manager True Potential as early as next year, two people familiar with the matter said, in what could be one of the largest recent deals in Britain’s investment advisory sector.
The plans, which are still in their infancy, could result in another investor such as a pension or sovereign wealth fund taking a minority holding in the company alongside Cinven, said the people, who spoke on condition of anonymity.
An initial public offering (IPO) of shares is also on the cards, a third person familiar with Cinven’s thinking said, although the market for new listings has yet to recover from a prolonged drought prompted by rocketing interest rates.
Both Cinven and True Potential declined to comment.
Private equity funds have been circling Britain’s vast but fragmented wealth management market, looking to roll up some of the many independent financial advisers (IFAs) that help savers manage their money, as well as their technology suppliers.
True Potential, one of the largest privately held providers of wealth management technology and services, sold a majority stake to Cinven in early 2022 at a valuation one of the people put at around 2 billion pounds ($2.58 billion).
The exact size of Cinven’s stake has not been disclosed, and the sources did not say what proportion it planned to divest.
The company and its private equity backer have not yet mandated advisers for a possible deal, but they are being assisted by corporate finance boutique Fenchurch Advisory in an ongoing strategy review, the people said. A spokesperson for Fenchurch also declined to comment.
Newcastle-based True Potential, which says it works with nearly a quarter of the UK’s financial advisers, has continued to grow under new ownership, posting earnings before interest, tax, depreciation and amortisation (EBITDA) of 176 million pounds for 2022, up 17% from the previous year.
It recently appointed senior Evercore dealmaker Andrew Sibbald as non-executive deputy chairman and Ben Thorpe from money manager Brooks MacDonald as chief financial officer to bring additional expertise.
Offering a stake in True Potential would allow Cinven to realise part of its investment while retaining exposure to the company’s future growth.
Soaring debt costs and economic uncertainty have slowed down the pace of private equity transactions in the past year, but dealmakers think a need to show returns will force buyout funds to revise their valuation expectations and sell more assets.
