Merger Costs and Complex Accounting Cloud L1 Group’s FY25 Earnings Outlook
L1 Group Limited has completed the audit of First Maven Pty Ltd’s FY25 financials and released the merged pro forma results combining Platinum Asset Management and L1 Capital. The merged entity reports $305 million in revenue and $177 million in adjusted EBIT, reflecting key merger adjustments and a complex reverse acquisition structure.
- Merged group pro forma revenue of $305.2 million for FY25
- Adjusted EBIT reaches $176.8 million with a 58% margin
- Transaction and merger-related costs total $23.3 million
- Intangible assets and goodwill recognized at $178.3 million
- Creation of Z Class Shares to allocate non-controlling interests on performance fees
Merger Audit Completion and Financial Disclosure
L1 Group Limited (ASX, L1G) has announced the completion of the audit for First Maven Pty Ltd (L1 Capital) FY25 financial report, a critical milestone following its earlier update in September 2025. This audit completion enables L1 Group to release the merged group’s pro forma historical financial statements as of 30 June 2025, combining the audited results of Platinum Asset Management Limited and L1 Capital.
Pro Forma Financial Highlights
The merged entity reported a combined revenue of $305.2 million, driven by management fees of $208.7 million and performance fees of $96.6 million. Adjusted earnings before interest and tax (EBIT) stood at $176.8 million, representing a robust 58% margin after excluding turnaround program implementation costs and merger expenses. These figures reflect the operational scale and profitability potential of the merged asset management group.
Accounting Complexities and Adjustments
The merger is accounted for as a reverse acquisition under Australian accounting standards, with L1 Capital treated as the accounting acquirer despite Platinum being the legal acquirer. This results in $178.3 million of intangible assets and goodwill recognized, representing the premium paid over net assets. Additionally, transaction and other merger-related costs are estimated at $23.3 million, including advisory fees and employee share rights issuance.
Z Class Shares and Performance Fee Allocation
A notable structural feature is the creation of Z Class Shares, which represent non-controlling interests related to certain performance fees that the merged entity will not fully consolidate. These shares reflect a nuanced allocation of performance fee income, particularly for L1 Capital’s LSF strategies, ensuring clarity in revenue recognition and shareholder equity distribution.
Balance Sheet and Other Considerations
The pro forma balance sheet shows total assets of $698.3 million and net equity of $386.6 million. The merger includes adjustments for margin loans related to Platinum shares held by L1 Capital and the consolidation of subsidiaries such as L1 Equipoint. The group has up to 12 months to finalize acquisition accounting, which may lead to retrospective adjustments impacting future earnings.
Overall, the financial disclosures provide investors with a comprehensive view of the merged group's scale, profitability, and accounting framework, setting the stage for integration and future performance monitoring.
Bottom Line?
Investors should watch for final acquisition accounting updates and the impact of performance fee structures on future earnings.
Questions in the middle?
- How will final acquisition accounting adjustments affect reported earnings in coming periods?
- What is the expected timeline and impact of disposing Platinum shares held by L1 Capital?
- How will the Z Class Shares influence shareholder returns and governance going forward?
