When Stuart Dyer stepped down as chief executive of Cofunds, his plans for retirement were on his mind.
But those plans took were put on hold when he went on to establish Soprano Consulting in 2012, a company that provides support to financial advisers engaging in mergers and acquisitions.
He set up Soprano Consulting because he had noticed a gap in the market for buying and selling adviser companies during his six-year tenure at Close Brothers, where he was involved in acquiring large IFA businesses.
Mr Dyer, chairman at Soprano Consulting, says: “What was noticeable was that when I was buying businesses for Close [Brothers] the sellers very rarely had the necessary resource to make transactions happen easily and efficiently.”
He adds: “We also found that buyers were not well supported by firms that were identifying potential purchases for them.
“The market is populated by brokers who will introduce a business to a buyer, but once they introduce the business, that’s where that function ends.”
Soprano Consulting was established to end that problem, Mr Dyer notes.
“I thought when I set up Soprano that it would be something that would be very episodic. We thought we would complete a transaction, have some down time, before we set off on the next transaction,” he says.
He adds: “I now find myself working five days a week, plus part of the weekend – not quite the episodic retirement plan I thought I would be setting up.”
Mr Dyer says he left Cofunds because it had reached the point where the initial phase of its development was over.
“I think it needed a different type of individual, [like] somebody that was probably more sales and marketing-focused, whereas I was probably more operationally focused. That point seemed a natural time to leave that business.”
‘Pretty special’
Mr Dyer says the proudest moment of his career was completing the first large deal at Soprano Consulting.
The deal involved Ascot Lloyd (then Bellpenny) buying the wealth management business of EFG Private Bank.
He declines to disclose the value of the deal.
“It was a time when it was a tiny business. We were dealing with quite a sizeable transaction in IFA market terms and we were up against quite a well-known corporate finance firm on the other side.”
He adds: “To execute that transaction successfully wasn’t a simple transaction. I think with the resource we had on board at that time, it was a pretty special thing to do.”
Mr Dyer always wanted to become a commercial pilot, but being partially colour blind put a stop to this career path.
He says: “I trained as an accountant and fell into offshore finance. It wasn’t planned, it just happened.”
He explains how he became the operations director of the unit trust business of Schroders, which was sold to an Australian company. This was then sold to Friends Provident and Mr Dyer became the managing director of the Friends Provident Unit Trust.
Mr Dyer warns that a trend of consolidation in the adviser industry will worsen in coming years, due to the regulatory burden.
“If you look at history, there really have not been many transactions. Maybe less than 100 a year in the IFA space.”
He adds that in the next three years there could be 500 to 700 company that may exit.
According to Mr Dyer, the combination of the forthcoming senior managers and certification regime, coupled with the difficulty in obtaining professional indemnity insurance for a sensible price, is “driving many smaller firms to consider [an] exit”.
Attractive targets
But Mr Dyer notes increased interest from fund managers in the adviser space.
We have seen the Schroders and Lloyds [joint venture among others],” he says.
Mr Dyer adds: “We have seen fund managers now look at IFAs as a way of ensuring distribution at a time where the distribution channels are becoming narrower for fund managers.”
He also notes that the sector will continue to drive interest from private equity companies.
“PE has been in this space for a while, but it’s principally been larger businesses they have focused on. But we are now seeing evidence that they are willing to look below that top level,” he says.
Mr Dyer explains that for those businesses that have some scale and have the potential to grow organically or through acquisition, there are quite attractive targets now for the mid-market private equity companies that were not involved in the first wave of acquisitions.
He attributes this to the fact that IFA companies have very stable income streams.
“The type of acquisitions that are interesting are fund managers looking at acquiring service providers in this space. People like the Intelligent Office being acquired by Invesco,” he says.
He added there is also evidence that fund managers are getting more interested in acquiring businesses in the IFA space generally.
Saloni Sardana is a features writer at FTAdviser and Financial Adviser
