The financial advice M&A market was handed a big boost several weeks ago when adviser support service company SimplyBiz rolled out an exit and acquisition scheme.
It will be made available to its member and client firms when the scheme officially launches on 1 September.
Matt Timmins, joint chief executive at SimplyBiz Group, told International Adviser that the offering is an “alternative” to the acquisition opportunities in the sector.
“There are lots of options in the market at this time when it comes to selling a business,” he said. “Almost all of them require you selling your business or your client bank to a consolidator of some description.
“While there’s nothing wrong with a consolidation model, and it works well for some people, the whole aim of the model is to get every firm working in the same way and to put clients into a relatively short list of fund solutions. For some advisory businesses, that’s okay, but others don’t like it.
“For many IFA businesses out there, what they would ideally like to see is the continuation of service to their existing client bank by someone who is in a relatively similar geographical sphere to themselves.”
Innovation
Timmins went on to say that the SimplyBiz buyout model is a breath of fresh air in the advice sector and is different to the conventional consolidation model.
He added: “We have to see innovation in the buyout market. For too long, the answers have been the same.
“A firm will buy you out and then your clients will end up in their solutions. All that happens is that consolidators have a kind of marketing war with each other to see who can put the highest theoretical multiple level on how they might buy a firm.
“No one is getting that payment up front, they’re all getting it based on hurdles and performance criteria.
“We don’t need more people doing the same thing. We need an alternative for firms who don’t want that as an outcome.”
Reasoning
Several months ago, SimplyBiz hired former Sanlam chief executive Alex Morley to head up the scheme.
He told IA that the offering for member firms was the “missing piece in the jigsaw”.
“I think it’s a reason for people to join,” Morley said. “It attracts new members in because it completes what is an already very complete service. Sometimes we’ll say to businesses, we don’t think you should be growing.
“We’re not here to do deals for deals sake. If we don’t think it’s the right thing for both parties, and of course, the client, then we will be dissuading people from engaging in that type of activity.”
Timmins added: “Simply Biz thought let’s put buyer and seller together, and let’s act in a way that helps IFA firms grow and selling firms sell.
“The benefit to us clearly is if those firms stay in the membership, then we haven’t lost any of our firms and advisers.
“We think it will help retain the membership and it will help make the membership more profitable if they buy out each other’s firms.”
Smaller firms buying
Over the last few weeks, IA has written a number of deals from smaller businesses outside of the usual consolidators.
Morley believes that more firms are starting to realise the “opportunity” that they have.
“Over the past 15 years, we talked about the aging population of advisers,” he said. “But, there are some younger advisers with younger businesses coming through, that are well run and are ambitious.
“They see their future being directly authorised and being independent, and they see the opportunity to build their business through acquisition of like-minded businesses and client base.”
Timmins added: “I think in the past, it’s been quite hard to scale IFA businesses. The assets were an issue and most of the time advisers were operated on different kinds of technology.
“Fast forward to now and there are younger people coming through, who run their business in a way which allows it to be much more scalable.
“They’re using tech in front of their clients. They’ve got a recognised back office and front office system, a straight through process for giving advice.”
Growth of scheme
SimplyBiz still hasn’t officially launched the scheme, however it has big ambitions for the offering.
Since the firm’s pre-launch email, over 100 firms have shown an interest to sell, while 25 companies are looking to buy.
Timmins added: “I could see us running this service as a continued continuing part of our overall operation. So, we don’t have an end date on it.
“I would imagine our first year will be slower than the years to come because we will all be getting used to it.
“I think that in an average year, we will be doing somewhere between 40 and 60 deals. I think the potential of selling firms within the membership over the next three years is probably 200 to 300 firms.
“That’s 10% of the membership in three years’ time.”
