Investments 

Advice firms are selling for higher prices

Advice firms are selling for higher prices

The growing number of consolidators in the advice market has started to lead to higher prices being paid for individual firms, according to Stuart Dyer, who runs M&A consultancy Soprano.

Mr Dyer, who works with both buyers and sellers of advice firms, said recent regulatory changes had fuelled the consolidation marketplace.

He said: "The same reasons that were behind advisers selling their businesses have always been there, but the Mifid II regulations around costs and charges disclosures has created a whole lot of new overheads for advisers, and small firms don't have the resources.

"A number of advisers are not looking to expand or innovate due to the time and cost of Mifid II.

"Until recently I would have said that the multiples at which advice firms are selling were not rising, but just lately, we are starting to see those rise, the number of buyers in the market is driving that, and firms believe they can achieve enough synergies to make the deals worthwhile."

Among the firms in the market seeking to make acquisitions are AFH, which has acquired five advice businesses this year, and recently announced plans to raise £30m via a convertible loan issue to raise capital for further deals. 

Mr Dyer said: "AFH is a listed business that trades on a multiple of 12 or 13 times, but it could buy a business that, with synergies, it has effectively paid a multiple of five times for, and that represents good value."

Quilter announced three deals in June 2019, that added over £200m of assets to its business. 

Harwood Wealth also announced in June that it has a pot of £7m to fund further acquisitions. 

Alistair Cunningham, managing director of Wingate Financial Planning in Surrey, said: "I would expect the average value of an adviser firm to be falling due to the issues with final salary transfers, professional indemnity etc.

"However, firms that have a good track record could now be worth more, and the difference from the 'best' and 'worst' may well be growing wider with a number of firms being unsaleable."

david.thorpe@ft.com