LONDON, UK: Mercia Asset Management has acquired the entire issued share capital of the central-Birmingham headquartered Frontier Development Capital Limited (FDC), for a total consideration of up to £9.5 million plus net cash.

Frontier Development Capital Limited (FDC) is a leading, regionally focused lender to SMEs, with c.£415million of funds under management (“FuM”). The acquisition is expected to be immediately earnings enhancing.

FDC has successfully built loan portfolios totaling c.100 companies, predominantly located across the Midlands and the North of England. As well as its Birmingham head office, FDC also has offices in Manchester and Bristol, two of Mercia’s existing office locations.

Frontier Development Capital Limited (FDC) typically makes commercial loans from £2.0million upwards, whilst Mercia’s existing lending parameters are between c.£200,000 and £1.0million. Combined, Mercia’s lending team will now comprise 41 staff managing c.£531million of FuM, of which 28 are experienced, regionally based lending professionals.

This strategic acquisition is for an initial consideration of £5.5million, satisfied in cash and funded from Mercia’s own liquid resources, plus an amount equal to FDC’s net cash position (subject to certain adjustments) as at 30 November 2022 and estimated to be approximately c.£1.5million. In addition, deferred consideration of up to £4.0million in cash will be payable, contingent upon the achievement of future revenue and net new institutional third-party fundraising targets for the two years to 30 November 2024.

FDC was majority owned by its senior management team and other staff, all of whom are remaining with the enlarged Group.

Mercia’s specialist asset management acquisition strategy is centred on two principles: 1) more of the same, principally profitable asset classes that the Group already understands and is managing, and 2) adjacent asset classes which would be complementary to Mercia’s existing ones. Overarching these two principles are people, culture and the opportunity for further organic growth in the future.

Mark Payton, Chief Executive Officer of Mercia, commented: “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. 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 c.£1.4billion.

“Having worked closely with FDC over the past few months, during the due diligence and integration planning phases, we also know that we will be integrating a business with a culture that is aligned to our own, including an investment approach underpinned by partnership and a belief in the long-term potential to be found in the UK’s regions. We welcome all FDC staff into #OneMercia and will be helping accelerate their growth through access to our networks, knowledge and broader footprint.”

Sue Summers, Chief Executive of Frontier Development Capital, 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.”