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Acquisitions cannot replace healthy growth, advisers warned

Acquisitions cannot replace healthy growth, advisers warned

Acquiring other advice firms is not a strategy for replacing organic growth within a business, the managing director of a financial planning company has warned. 

Speaking at the Chartered Institute for Securities & Investment Financial Planning Conference 2019 in Birmingham today (October 1), Sandy Robertson said an adviser is only ready to purchase another business if their own financial records and teams are in order. 

Mr Robertson is the managing director of Scottish firm Acumen Financial Planning, which in recent years has acquired four small financial planning businesses. 

Mr Robertson said: "When the acquisition takes place is not a date or time. When is when your business's core strength is good and you are in a state or preparedness and readiness to do a transaction if one comes along." 

Where some deal opportunities will become available very quickly others can take "forever", but in both cases if a business does not have a healthy record or strong organic growth then an acquisition should not be pursued, Mr Robertson warned. 

He said: "Acquisition is not a replacement for organic growth. If you do not have a healthy cash balance, don't do this. 

"If you don't have somebody identified within your team, or from outside your team, to run the new project it is going to be an up hill struggle. 

"If your own business isn't running like a watch, an acquisition is not going to solve it."

Mr Robertson said advisers should also consider whether an acquisition which sees a new client bank join the firm is favourable for existing clients. 

"Are you at risk of destroying what you have already built?", he added. 

Yesterday wealth manager AFH Financial Group, which has completed seven deals in this financial year, announced it was pausing its acquisition spree in favour of focusing on its "organic revenue growth". 

The firm has completed 50 acquisitions since it joined the AIM in 2014 and deployed a similar strategy in 2016 when it moved to de-risk its business model by focusing on a period of integration for deals it had made in the previous 12 months. 

AFH pointed to an "uncertain political and economic" climate as cause for the latest pause in new deals.

rachel.mortimer@ft.com 

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