Tavistock Investments has agreed to buy IFA firm Abacus Associates Financial Services, bringing the adviser into the wider Tavistock Group.
Abacus, a directly authorised Hereford-based firm with 45 predominantly self-employed advisers covering the North East, Midlands and South West of England, will become a wholly owned subsidiary of the group from 1 April 2016.
In its unaudited accounts for the year ended 31 January 2016, Abacus reported pre-tax profits of £781,000 on turnover of £4.5m.
It also reported net assets of £1.59m, which included £1.23m in cash.
The company’s assets under influence are estimated to exceed £650m, of which some £250m are managed directly on an advisory basis.
Malcolm Harper, Abacus’ founder and managing director, said Tavistock provides a range of discretionary investment solutions that will suit many of his clients.
“The transaction has also ensured the potential for a retirement exit for each of our advisers at a time that suits them,” he added, noting that he will remain a significant stakeholder in the enlarged group.
Tavistock will retain the Abacus brand and Mr Harper will continue to lead the business, as well as taking on wider responsibility as part of the group’s senior management team.
The fixed initial consideration for the transaction is £5.165m, with a payment of £4.16m at completion, of which £2.53m is to be settled in cash and £130,000 through the adoption of a debt obligation.
The balance will be met through a share issue and cash to be paid on the first anniversary of the deal’s completion.
Under certain circumstances, if Abacus’s share price is not 7.5p or greater in July 2018, a further “adjustment” consideration may be payable in cash.
Brian Raven, Tavistock’s chief executive, stated that this transaction signals a significant milestone, as the group moves into healthy profitability.
“Less than two years after completing our initial transaction, we are established as a national brand with over 300 advisers, FUA approaching £4bn and FUM of £425m to £250m in advisory models and £175m in discretionary portfolios.”
As recently as December, Tavistock Investments had blamed pre-tax losses of £883,000 over the six months to the end of September on its deal to take over ailing network Financial Ltd.
The transaction is to be financed using the Tavistock’s existing resources, together with the proceeds of a share subscription and a new debt facility.
It has entered into a new, three-year, £2m debt facility with Assetz SME Capital, secured by a charge in favour of Assetz SME Capital over the group’s shares in Abacus.
“Interest on the facility is to be paid monthly at the rate of 9 per cent per annum and repayment of the principal sum will be made at the end of the term from the cash resources and cash generation of the enlarged business,” read a statement.