Listed advice sector consolidator Tavistock Group has acquired Standard Financial Group, the holding company of the Financial Ltd network, for a minimum price of £2.7m, following the network’s results which revealed it was looking for investment.
Brian Raven, chief executive of Tavistock Investments Group, called the purchase a “transformational deal”, telling FTAdviser that the new management team has “remedied every possible issue” and what could be perceived as a negative was in fact positive change.
On Friday, FTAdviser reported that Financial Ltd was seeking investment to secure the business, after posting post-tax losses of over £120,481 for the year ending March 2014, up from a loss of £28,193 in the previous year.
Difficult trading conditions post-RDR were exacerbated by an FCA ban on recruitment brought in last July - and only lifting in November - for failures on control of appointed representatives, with fines of over £13m only escaped due to having insufficient funds.
Mr Raven said: “The losses were due to adviser numbers dwindling from 500 to around 300 and the recruitment moratorium, but new advisers have been joining since November.”
He stressed that from tomorrow it would be “business as usual”, with Financial Ltd’s synergies with Tavistock looked at in more deal adding that the new business would support both independent and restricted financial advisers.
Financial Ltd is currently made up of roughly 75 per cent independent advisers to 25 per cent restricted.
In the announcement today, Aim-listed Tavistock said that the £2.7m will be issued via a placing of 135,000,000 new ordinary shares at a subscription price of 2 pence per share and an open offer of up to a further 30,455,624 new ordinary shares.
Senior management of both Tavistock and Financial Ltd have invested a combined £500,000 in the placing.
The acquisition, which is subject to change in control approval from the Financial Conduct Authority and approval from shareholders, will create an advisory group with over 300 financial advisers and 65,000 clients across the UK.
The combined group’s turnover will be over £30m and assets under advice are projected to grow from the current £400m to over £3bn.
The acquisition’s size relative to the company makes the transaction a “reverse takeover” under the Alternative Investment Market rules and as such requires the approval of shareholders. This will be sought at a general meeting on 12 February.
Financial’s current management team, including managing director Brian Galvin, will retain their roles within the enlarged advisory business, although Charles Palmer, the group’s chief executive, will be moving aside in order for the deal to complete.
Mr Galvin commented that the deal underlined the strength of the firm’s operating model.
Mr Raven added: “We are acquiring a good business led by a strong senior management team that has transformed the company operationally and culturally over the last two years.
“The governance and compliance culture they have instilled will fit perfectly with Tavistock, and we intend to invest in both people and services for the benefit of clients, employees and advisers.”
The directors believe that the acquisition presents the opportunity to establish Tavistock as a national financial services brand, with economies of scale and improved margins.
It will raise the profile of the company and thereby enable it to attract high calibre advisory firms and to complete other significant corporate transactions, according to a statement.
Mr Raven added that Tavistock was an ambitious company and that its rapid growth in the last 18 months is set to continue, although further acquisitions will depend on the size and timing of opportunities, as well as how smoothly things go with the Financial Ltd deal.
peter.walker@ft.com
