Hudson: Significant opportunity to grow our business
The seventh law firm to list – although it describes itself as an asset management consultancy – raised £31.4m as its shares began trading last week.
MJ Hudson (MJH) had a market capitalisation of £98m when trading began last Thursday at 57p. The shares closed on Friday at 59p.
MJH says it provides “expertise and infrastructure support to fund managers, investors and other specialists in the asset management industry”. It has a particular focus on the alternative investments market, which represents 75% of its income.
Founded in 2010 by solicitor Matthew Hudson, originally as a specialist law firm for asset managers, it has since diversified to offer a one-stop shop of specialist asset management consultancy services to fund managers and investors.
It said it intended to use the new funds to further develop and enhance its core advisory, business outsourcing and data & analytics divisions – it claims that no competitor offers all three of these – carrying out further acquisitions, and expanding in the key markets of the UK, US and Europe.
For the year to 30 June 2019, underlying turnover – excluding payments made to clients linked to the performance of their funds – was £16.7m, 65% of which came from advisory work. MJH made an operating loss of £1.1m.
The vision is to be the leading services and infrastructure provider for alternatives fund managers and asset owners throughout all stages of their development. As well as the growth of the market, it said the asset management industry was “experiencing an increase in the outsourcing of certain middle and back-office functions… to third-party providers”, such as MJH.
Demand for the firm’s services was also being driven by increasing levels of regulation and demands for greater transparency, it said.
To achieve its vision, MJH would seek to acquire more and larger clients through providing more solutions and analytical tools, it told investors.
“The group seeks to scale the business through four key routes; organic growth, acquisitions, investing activities and franchise opportunities.”
Mr Hudson, who is chief executive, said: “With the global alternative investment market forecast to exceed $20trn in the next five years, we see a significant opportunity to grow our business through a public listing.
“We have proven our ability to expand through both organic and acquisitive growth and we have attracted major international clients thanks to our reputation for quality service delivery, analytical tools from our large data capture, and alternatives fund management focus.
“As a highly ambitious growth company, one which we started from scratch, we see the public markets as our natural source of long-term capital.”
Through its three divisions, MJH offers legal, investment advisory, investor relations, fund and corporate administration, benchmarking, reporting, regulatory and risk services to over 750 clients, more than 500 of which are fund managers and over 200 are institutional investors.
Assets managed and advised by MJH clients totals more than $1trn.
Headquartered in Jersey – but an alternative business structure regulated by the Solicitors Regulation Authority – the firm has 182 staff with offices in the UK, Guernsey, Luxembourg, the Netherlands, Switzerland, Italy and the USA. The legal team is made up of 12 partners and a further 22 professionals across five locations.
The group has set up three separate employee incentive plans: one for senior management linked to the long-term performance of the group, another for “any person providing services or value to the group”, and an option plan for UK staff.
Just over half of MJH’s income currently comes from UK work, but with 58% of the global alternatives market in the US, the firm said it saw “significant potential” for growth there; it opened a New York office in September, having bought Amaces, a US-based asset management benchmarking analytics firm, a year ago.
It has completed six acquisitions over the years, most recently in July an environmental, social and governance reporting and consultancy business in the Netherlands. A deal to buy Jersey-based Anglo Saxon Trust, a provider of company and trust formation and administration services, is expected to complete shortly.
It has also invested in six starts-up, while in early 2019 it established a specialist funds law practice in Italy with a local team of lawyers under a franchise arrangement. This permits this business to trade under the MJH brand (MJ Hudson Alma) in exchange for a share of gross revenues.
Expansion has to date been funded by a combination of internal cashflow and external funding – around £26m has been raised since 2010 from management, other investors and debt providers.
The £26.3m net proceeds of the IPO will be split into £3.4m to fund near-term cash instalments for the acquisitions of Amaces and the Dutch company, £3.7m to finance the Anglo Saxon Trust deals, and up to £19.2 million for investment activity, further acquisitions and expansion into the US, as well as for general working capital purposes.
In addition to SRA regulation, various parts of the MJH group are regulated by the Financial Conduct Authority and financial regulators in Jersey, Guernsey and Luxembourg.
The admissions document said: “In addition, the directors believe that admission will assist the group in its development by (i) further raising its profile; (ii) facilitating access to capital and providing a currency and profile to more aggressively pursue acquisitions; and (iii) attracting and retaining talent.”
Prior to founding the firm, Mr Hudson co-founded the private equity team at what was then SJ Berwin, re-established the London office of O’Melveny & Myers and set up the London office for fellow US firm Proskauer. He owns 23% of the firm’s share capital.
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