Troubled Financial Planning group Kingswood, which has expanded rapidly in the past five years, may be sold 100% to a private equity firm as it wrestles with a £91m debt mountain.

Private equity firm HSQ, which already owns 68.4% of Kingwood, may make a bid for the rest of the business at 7p a share, Kingswood said today in a statement.

Kingswood has borrowed heavily to fund expansion but has needed several cash injections to repay debts and has said today that it is in danger of running out of money to service its debt pile.

Kingswood has stressed that HSQ may possibly make an offer for the rest of the shares and nothing has been confirmed. If the deal goes ahead it's likely Kingswood will delist from the stock market and become a private company.

HSQ initially invested in Kingswood in September 2019 and in doing so provided up to £80m of growth equity capital to the business. HSQ owns 68.4% of Kingswood's voting rights and has reiterated its support for the company, Kingswood said.

HSQ believes that it can best support Kingswood by being the complete owner of the business.

Kingswood has seen strong growth in revenues and AUA/M since 2019 but admitted that recently its performance had been hit by “headwinds” it says have also been seen across the sector over the last couple of years.

Kingswood said that in tandem with this its acquisition strategy has seen the company's debt increase significantly over the last two years, rising from £39.7m to £48.1m as at 31 December 2023.

Since the start of 2024, to satisfy the working capital obligations of the company, including to meet deferred payment obligations and debt interest payments on its senior debt facility, HSQ, or affiliates of HSQ, have provided the company with additional loans amounting to £21 million.

As at 31 December 2024, the unaudited gross debt in the company from its senior debt facility, and the loans provided by HSQ and/or affiliates of HSQ since February 2024 amounted to, in aggregate, £90.7m.

Kingswood said against this backdrop it has “imminent obligations” which significantly exceed the cash balance available at the end of this month (March 2025).

In a statement the company said: “In the absence of new external financial support, the company would not be able to satisfy these obligations.”

The statement added: “HSQ has confirmed that they continue to be supportive of the business but believe that this is most appropriate from a position as sole institutional shareholder alongside the company moving to an unlisted, private company setting and therefore they have stated that they would be willing to provide the required near-term funding only on this basis. 

“The Kingswood Independent Directors are strongly of the view that there is no other near term credible alternative to the company other than the continued financial support from HSQ.”  

Kingswood has expanded rapidly in recent times and has acquired over 20 firms, many of them Financial Planning businesses. However in July last David Lawrence, the CEO, quit the firm after overseeing much of the expansion. He was replaced by ex-Positive Solutions CEO and Chartered Accountant Peter Coleman as interim CEO.

Mr Lawrence headed the company for four years and oversaw many acquisitions and integrations, growth in AUM, an expansion to approximately 20,000 clients and the integration of IBOSS. Recent results showed that group revenue was £86.2m, up 37.7% on the previous year, while operating profit was £10.8m, up 37.9%. Kingswood employs about 400 staff. 

In a statement last summer the company said Assets Under Management or Advice in the the UK & Ireland were approximately £9.8bn (31 December 2023: £9.4bn). However the most recent reporting period saw outflows in Assets under Advice in the UK following the departure of some wealth advisers.