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Fairstone eyes larger deals amid 'active discussions with three DFMs'

Fairstone eyes larger deals amid 'active discussions with three DFMs'

Fairstone’s chief executive officer Lee Hartley has said the firm is eyeing deals of a larger nature and was in talks with three firms in the discretionary funds management space.

Over the past year, Fairstone has made a number of acquisitions but the Fairstone boss said it was now looking further.

Speaking to FTAdviser, Hartley said: “We have our own DFM offering and we have an investment framework, which has a suite of portfolio solutions, some which are entirely proprietary, some which we run in partnership with other fund managers on a segregated mandate.

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“We’ve got approximately  £1.25bn in our DFM business today. What we're looking at doing is seeing if we can start by acquiring smaller, good quality DFM businesses in broadly the same way as we acquire advisory businesses and then using that to further scale up our own in-house assets to a far greater degree.”

He added: “We have a lot of financial firepower to do so, we've got a very proven acquisition team. We are hoping to grow that £1.25bn to £3-4bn in the medium term. We know how to integrate businesses extremely well - why wouldn't we move into an adjacent sector to see if there are more opportunities there?”

Hartley said he could not disclose further details at this stage but said the firm was in “very active discussions” with three firms of that nature at the moment which could happen possibly this year. 

“What we are finding is that the due diligence process with the DFM business is just that little bit more involved and takes a little bit more time than it does with the financial advisory business,” he said.

“We've been doing this for six or seven years, so possibly, we may do something this year, but I would think more realistically in 2022.”

DBO scheme

Fairstone has been running the downstream buyout scheme for nearly seven years and said it has had 59 firms come into the DBO model, of which it has fully acquired 38.

The downstream buyout acquisition model integrates IFA firms into the group, typically over a two-year period, prior to final acquisition. 

Outside of the firms that are already in the programme with scheduled acquisition dates, Hartley said “north of 55 firms” are at present coming onto the DBO programme and “interest has never been higher”. 

“There are 20 firms that we will acquire all the rest of this year and next year, and maybe the early part of 2023 because we only have a two year rolling programme, and we bring on board on average, ten to 12 new firms per year. 

“It is the core driver of growth in the business. It works, and it means that we are talking to a different community of people, we're talking to business owners who do not want to sell today. They want to grow and want somebody to invest in their growth and support them.”