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A good time for acquisitions?

A good time for acquisitions?

Advisers looking to sell their business are faced with a somewhat mixed picture of the acquisition market at the moment.

Some consolidators are continuing to fire ahead with plans to buy, whereas others have decided to take a step back. 

Tavistock Investments, Attivo Group and AFH have reportedly paused their acquisition activity. 

Also, the Embark Group, which undertook three acquisitions last year (two in the platform sector and one in multi-asset fund management), has told Financial Adviser that it is not planning to purchase any businesses in 2020.

Others have indicated they are open to considering suitable acquisitions. For instance, Fairstone recently announced a deal to bring another adviser business on board, with more than 5,000 clients, six advisers, gross fee income of £1m and funds under management of £104m.

So, what are the chances of advisers selling their business during a pandemic? 

Key points

  • The picture on mergers and acquisitions is mixed.
  • Consolidation is expected to continue.
  • Finding money to pay for an acquisition might be more difficult.

Ascot Lloyd, which completed seven acquisitions in 2019, is upbeat about consolidation prospects, as acquisitions director Gordon Kerr says: “We believe there continues to be a market for acquisitions during the current environment, and we have spoken with a number of firms looking to sell during the lockdown.

“We still see consolidation in the market and expect this to continue.” He adds: “Our goal remains the same: to grow the business both organically and through acquisitions.”

Succession Wealth, which has acquired 56 businesses to date, has a similar outlook, according to Paul Morrish, group corporate director: “We continue to work to complete the acquisitions that were in our pipeline as we entered lockdown.

“These are all progressing and, interestingly, we have seen notable numbers of new firms of various types and sizes being added to our pipeline in the past couple of months.”

And more could be welcome, he explains: “There is a very large number of excellent financial advisory businesses in the UK, and buyers such as Succession will always be interested in such businesses. The landscape, while undoubtedly different, affords good prospects for intentional sellers.”

Truinvest, which launched last year, is bullish about acquisition prospects too, setting its sights high in its first year as a consolidator, as 

co-founder Micky Johal, previously director of mergers and acquisitions at Mattioli Woods, says: “We have a clear strategy for creating scale in 2020, with an assets under administration target of £1bn.” Truinvest is currently close to completing its second acquisition in the advice market.

A swath of acquisitions and mergers

Acquisition activity may be more likely where buyers see the current situation as short term and where smaller advisers are feeling the weight of regulation or are bruised by the pandemic.

Rob Cherry, a partner in legal firm Blake Morgan’s corporate team, says: “The Covid-19 crisis is likely to leave many smaller and less financially resilient financial advisory firms either in difficulties or wondering whether they are too exposed to economic shocks to continue as they are. This could lead to smaller firms actively looking to become part of something larger and more resilient.