Mercia Asset Management PLC has acquired Frontier Development Capital Limited for a total consideration of up to £9.5 million plus net cash.
Birmingham-headquartered Frontier is a regionally focused lender to SMEs with £415m of funds under management and loan portfolios totalling around 100 companies, predominantly located across the Midlands and the North of England.
FDC also has offices in Manchester and Bristol, two of Mercia’s existing office locations.
FDC typically makes commercial loans from £2m upwards, whilst Mercia’s existing lending parameters are between £200,000 and £1m.
Combined, Mercia’s lending team will now comprise 41 staff managing £531m of FuM.
The initial consideration is for £5.5m, with deferred consideration of up to £4m in cash contingent upon the achievement of future revenue and net new institutional third-party fundraising targets for the two years to 30th November 2024.
FDC was majority owned by its senior management team and other staff, all of whom are remaining with the enlarged group.
Mercia says it strengthens its position as a leading, regionally focused and proactive supporter of SMEs.
For the year to 30th November 2021, FDC generated revenues of £5.1m and profit before taxation of £1.3m. Its net assets were £1.7m.
“We’re delighted to be able to announce the acquisition of Frontier Development Capital, which represents an important strategic milestone for Mercia, as we drive towards our ’20:20′ objectives,” said Mercia CEO Mark Payton.
“[CEO] Sue Summers and her team have built an outstanding and highly regarded UK lender and the acquisition will bring complementary capital, capabilities and reach across the UK’s regions, whilst also seeing our AuM grow to £1.4bn.”
Summers added: “Mercia has long been a business we’ve admired. Our shared passion for helping some of the UK’s most exciting SMEs to thrive through supportive capital, makes Mercia the natural partner of choice as we look to continue the growth we have experienced since launching in 2016.
“Furthermore, Mercia’s reputation and reach will be highly additive to both our future fundraising efforts and identification of potential lending opportunities.
“Mercia has established itself as a go-to provider of capital across the UK regions, and we’re excited to be part of their vision to be the first choice for investors, investees and employees.”