Investments  

Adviser lines up ten acquisitions

Adviser lines up ten acquisitions

Adviser consolidator Fairstone has lined up at least ten acquisitions within the next two years, according to chief executive Lee Hartley.

Fairstone builds a pipeline of acquisitions by initially partnering with firms it wants to acquire, before buying them a few years down the line.

Five firms joined the so-called downstream buyout programme in 2018 with a view to being acquired in 2020, and five have joined in 2019, with a view to being acquired in 2021, Mr Hartley said.

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Mr Hartley was commenting in the context of the company’s annual results for 2018, which were published today (September 2), which showed growth in assets under management of 36 per cent to £7.2bn, and profits of £2.5m. 

The firm employed 340 advisers and had 59,000 clients at the end of 2018.

The profit number excluded the cost of exceptional items such as acquisition costs, the award of share options to staff, and other one-off items.

Mr Hartley described the financial results as “ahead of forecast.” 

He said: “A combination of organic growth and the success of our unique DBO programme, which reverses the traditional buy and build approach, is continuing to deliver exceptional results and to drive growth, with a series of deals with partner firms being completed at various stages within the financial year.

“Our considered approach, together with our proven business model and the significant financial backing that we have at our disposal, allows the management team and shareholders to look forward to 2019 and beyond in a positive manner.”

As part of Fairstone's buyout model the firms agree a valuation formula for their business at the start and the management continues to run their firms with agreed targets to grow revenue and other areas of their business.

After two years Fairstone typically completes the acquisition.

The Newcastle-headquartered company also operates a discretionary fund management business. 

In February Fairstone announced it had secured £30m from its financial backers to continue buying advice businesses, bringing the total backing since inception to £70m.

The latest funding round included lead investor Synova Capital, HSBC and Lloyds.

david.thorpe@ft.com