BRAVEHEART, the Perth-based investment manager, has sold its loss-making corporate finance advisory arm Envestors to a management buy-out team.
Although Braveheart said its London-based subsidiary had shown steady growth since its acquisition in a deal worth up to £2.45 million in 2010, it had not performed in line with expectations or made a positive contribution to the group’s financial performance.
“Recent trading has been poor and the business has made significant losses due to high fixed costs,” said Braveheart chief executive Geoffrey Thomson.
He also said that the nature of Envestors corporate finance advisory work meant there was little forward visibility on revenue which tended to be volatile.
“This model does not fit with the group’s strategy of building a business based on long-term contracted revenue,” he said.
Braveheart stressed the two businesses will continue to collaborate on “certain initiatives for mutual benefit”.
The buyout will be paid for through the cancellation of the final Braveheart share issue, worth around £130,000, due to the three management buy-out participants which was agreed at the time of the Envestors acquisition.
When the deal was struck to buy Envestors, Braveheart agreed to pay a maximum of £2.45m in shares to the owners depending on the company’s performance.
At the time of the deal - which was the third since Braveheart joined the Alternative Investment Market – it said the deal would bring benefits in terms of a broader service offering to investors and increased deal flow from a wider geographic base. In September Envestors took part in a £3.5m equity funding round for specialist foreign currency provider Ebury Partners with more than £1.15m sourced from Envestors network of investors. Its other fundraising clients have included fitness operator payasUgym.
Braveheart yesterday said the rest of the group’s operating companies are trading in line with expectations.
“This divestment will enable the group to concentrate its resources on growing its fund management business,” said Thomson.
The group expects to announce its interim results shortly.
Earlier this week, Breaveheart said that, in the last quarter, its Finance Yorkshire Equity Linked Fund concluded 13 investments totalling £4.27m.
Finance Yorkshire’s Equity Linked Fund invests in SMEs across the Yorkshire and Humber region and is managed by Viking Fund Managers, a wholly owned subsidiary of Braveheart.
Since its launch in 2010, the Equity Linked Fund has made 56 investments in 34 companies.
Shares in Braveheart closed unchanged at 15.5p.