Southeast financial advice firm Foster Denovo has landed a £100mn investment from US private equity firm Crestline Investors to fuel its consolidation strategy.
The investment will see the Texan investor take a minority stake in the advice firm, but Foster Denovo’s boss told FTAdviser this stake was “small” and control of the firm remained firmly with its individual shareholders.
“We wanted to protect our culture, that was a must have,” said Roger Brosch, chief executive of Foster Denovo. “Whether it’s new advisers joining or firms we’re looking to buy, ownership is a real concern for the market.”
The advice firm has already received £30mn of the investment which it has used in part for four internal acquisitions of self-employed advice firms.
The remaining £70mn will be unlocked over the next five years, supporting external as well as internal deals.
Brosch said his team was in discussions with a few external firms and that deals are already “in the pipeline”. His vision is for Foster Denovo to become a national advice firm, with an eye on expanding into the northwest and southwest.
“We would certainly hope to be active [in the acquisition space] this year,” he said. “We’re very flexible when it comes to timing [of deals]. Having said that, we have the money and want to put it to work so I’d hope for one or two external deals this year.”
Foster Denovo was originally part of Tenet under the name Capital Planet UK. In 2007, the current management team bought out the business, which has since grown to £4bn in assets under management and 84 partners.
The firm is split into two arms, with one focused on advising individuals, and the other focused on corporate advice operating under the name ‘Secondsight’.
Its hybrid model means around 70 per cent of its advisers are employed, while the other 30 per cent are self-employed. Over the years, Foster Denovo has been transferring self-employed advisers and their firms to the firm via a practice buyout (PBO).
“We've done four of these sorts of transactions immediately on the back of the investment coming in, and we've got another seven or eight lined up to do in the next 12 to 18 months,” said Brosch.
“The impact of that is transformational to the group because it triples our profitability pretty much overnight.”
The firm posted revenues of £27mn for its 2021 financial year. In total, it has acquired fourfirms externally to date, with two enhancing its private clients arm, and two growing its corporate advice arm.
Brosch has his eye on two large ‘hub’ purchases in the northwest and southwest, after which his team will scope out “bolt-on” deals.
The firm’s new stateside investor was “very happy to take a small minority stake”, according to Brosch.