Rival brokers FinnCap and Cenkos Securities merge to make City’s largest mid-tier investment bank
Rival brokers FinnCap and Cenkos Securities have agreed an all-share merger which will create the City’s largest investment bank focusing on small cap growth companies.
Together the combined company has expected revenue of more than £50m and over £20m on its balance sheet. Both companies’ shareholders will hold 50 per cent of the equity in the newly merged company.
The new group will be led by the existing CEOs of Cenkos and FinnCap as co-CEOs.
The two companies both have a market capitalisation of around £21m.
The group has ambitions to build “strong foundations” across equity capital markets, M&A advisory and private growth capital fundraising.
A statement said there are “potentially significant cost synergies” from shared systems, processes and infrastructure. It also has “clear future revenue potential” through broader client reach.
The combined group will retain 210 listed or quoted clients and employs 230 people.
Lisa Gordon, chair of Cenkos and intended chair of the combined board, said: “This proactive and mutually-beneficial merger creates a champion for growth and investment companies, both UK-quoted and private entrepreneurial businesses, that are the backbone of our economy.”
John Farrugia, co-CEO of FinnCap and intended co-CEO of the group, said: “In Cenkos we have found a partner who shares the same vision, desire and drive to create one of the leading financial services advisory firms focused on the mid-market.”
The proposal currently has the support of 33 per cent of Cenkos’ shareholders and 52 per cent of FinnCap’s. The scheme is expected to become effective during the third calendar quarter of 2023
The news comes months after fellow City broker Panmure Gordon abandoned a bid for finnCap after failing to agree a price.
The merger comes amid a challenging backdrop for City brokers, with a widespread slump in capital markets hammering profits throughout the sector.
Cenkos recently reported a £2.24m loss for the full-year, down from a £3.4m profit a year ago, while Finncap swung to a £2.59m half-year loss in December as flotations dried up.
The share price of both London-listed brokers have suffered accordingly, with shares in FinnCap and Cenkos falling 59 per cent and 49 per cent over the last year respectively.