It’s usual in takeover negations for the chief executives of both firms to be closely involved. In the case of Australian Unity’s approach to Premium Wealth Management, however, the situation is a bit different. They’re brothers.
Paul Harding-Davis, CEO of Premium (on the right in the picture), and his younger brother, Australian Unity Personal Financial Services CEO Steve Davis (on the left), recused themselves from initial negotiations, and will continue to carefully manage any actual and potential conflicts of interest.
Australian Unity and Premium last week entered into a non-binding indicative offer under which Australian Unity Personal Financial Services – subject to the completion of due diligence and a vote of Premium’s shareholders – would acquire all of the shares in Premium Wealth.
A side issue to the mooted deal, should it proceed, is the intra-familial issue of the older sibling potentially reporting to the younger one.
Neither party has disclosed what value the offer places on Premium, but Harding-Davis says the board would not be referring it to Premium shareholders if it did not believe the offer to be “fair”.
Bringing the two businesses together would create a financial planning entity with 53 practices and 179 authorised representatives (as well as 22 finance brokers). The transaction is being driven by a belief that as an increasing number of accountants move into a new licencing regime from July 1, 2016, there will be significant opportunities for licensees that offer attractive accountant licensing options.
A good fit
Davis says the two businesses make a good fit.
“It’s not about changing the business model or anything like that,” Davis says.
“This gives us a bit more scale in an area where scale is even more important now that it was a few years ago.”
Harding-Davis says Premium’s status as an unlisted public company “creates an obligation on the board if an offer or an approach is made, and it’s fair and reasonable, to [advise] shareholders”.
“We also understand that a deal has to be able to be delivered,” he says.
“If the [Premium] practices do not like what they may be going into, even though it may be good for shareholders, [and] if you can’t deliver the deal, there’s no point going into it.”
Harding-Davis says Australian Unity’s mutual ownership structure is appealing.
“They are able to position their advice around the client,” he says.
Egalitarian group
There is no single shareholder that dominates the Premium register, with the Wu family owning about 15 per cent of the shares and the other largest single bloc being of a similar size.
“We didn’t ever want any one practice to own more than 15 per cent,” Harding-Davis says. “We wanted it to be an egalitarian group.”
Subject to Australian unity successfully completing due diligence, Premium will circulate an information pack to shareholders in coming weeks. Should shareholders decline the offer, Harding-Davis says, Premium has “a very good strategy” for growth in its own right.
The company will soon introduce a new licencing option for accountants “targeted at established, reasonably large practices to allow them to bridge from a limited license, and enable them to grow”.
Davis says Australian unity views the Premium network as “a really good group of advisers”.
“The thing that’s really attractive to us, as we’ve been working with accountants – certainly for the past five or six years that I’ve been here – is we know there’s enormous benefits for clients when a good financial planner and a good accountant come together – you get a much better outcome,” Davis says.
Most value to clients
Davis says he expects an initial rush by accountants to find comprehensive licensing solutions, then a “gradual subsidence, and it will come back to people focusing on the area that’s of most interest to them and can add most value to clients”.
“You can’t do everything,” Davis says.
“One person can’t, though a firm has the capacity to have different specialists working within it.”
He says Australian Unity will be selective in the accountants it works with.
“We want to grow, but we do not want to lose that personal contact and that personal relationship,” he says.
“From a risk management perspective you can do all the compliance work you want, but at the end of the day it’s about the quality of the person, and their personal integrity.”
Australian Unity added 14 practices to its network in the 12 months to mid-July, 2014, and through its Accountant Partnership Program has relationships with more than 300 accounting firms, many of who refer clients to AUPFS for financial planning services.
Although it remains a mutual organisation, Australian Unity posted a profit after tax of $6.1 million in the six months to December 31, 2013.
