Grafton Capital-Backed Third Financial Eyes $100m Sale

Grafton Capital backed white-label platform provider Third Financial is up for sale, Citywire New Model Adviser has learned.

An investment bank is advising Third Financial on the process, and an information memorandum has reportedly been distributed to prospective buyers, with a target valuation of just under £100m.

According to an industry source, one of the interested parties is Nucleus, though it is not clear what stage the talks between them have reached. Both Third Financial and Nucleus declined to comment on the matter.

Third Financial – led by CEO Ian Partington – started out in 2008 as a wealth management software business before moving into the investment platform technology market in 2016 following an investment from PE firm Grafton Capital.

The London-based PE firm became Third Financial’s majority shareholder in 2020, having invested £7m into the business since 2015. 

Typically, Grafton invests in startup technology companies as a minority partner but in some cases, it acquires a majority interest.

There are two parts of Third Financial’s business: software and services – which are plugged in by wealth management firms – and its own investment platform for advice consolidators and wealth managers. The latter has just under £7bn in assets under administration.

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Third Financial’s platform is akin to the advice white-labellers Seccl and SS&C Hubwise and provides custody and a back end, while allowing for advice firms to customise the front-end user interface.

National advice firm Foster Denovo and AIM-listed wealth manager Kingswood are among its white-label platform clients, while NMA Top 100 advice firm Lowes Financial also recently partnered with it.

In 2022, Third Financial reported profit before tax of £2m – up from £856,000 in 2021 – on revenues of £11m, the latter of which were up 34% year-on-year, according to its most recent financial statements.

Out of its revenues, £3.4m came from its software service arm, £6.2m from its custody platform and £1.4m from interest on client cash accounts.

Last year, the firm also issued new D1, D2 and D3 ordinary shares to its employees and directors which, ‘in the event of an exit event’, will convert into ordinary shares of £1 each, depending on the valuation. 

Source: Citywire

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