The merger of Infocus Wealth Management and Patron Financial Services highlights some specific challenges faced by Australia’s non-aligned financial planning dealer groups.
The heads of both parties involved in the deal, Rod Bristow, managing director of Infocus and Rob McCann, Patron general manager, refer to the scale benefits the merged entity will derive.
If the merger proceeds, the combined group will have around 200 advisers overseeing some 50,000 clients and $5 billion in funds under advice. According to Bristow, it will rank “probably in the top three or four in the non-aligned space.”
“We’re really excited about it. Infocus had only a small presence in NSW, [through the merger] we expect to increase our focus in the NSW market,” says Bristow, referring to the stronger presence Patron holds within the eastern state.
According to McCann, “with us coming together, we’ll form one of the largest independent groups in Australia today…we’re in a great place to be able to support advisers looking to join a truly independent dealer group”.
However, Tony McDonald, principal of T&C Consulting, urges dealer groups involved in such transactions to be certain they are not simply pursuing “a merger for merger’s sake”.
“What’s the point of difference – is it just to compete against the banks on scale?” McDonald asks. He suggests that those non-aligned licensees who go down this route are taking part in “an arms race you’ll never win”.
McDonald also refers to a further challenge such mergers face in ensuring the true benefits of scale are realised.
“If you allow all the members to run like niche practices, where do you get the scale benefits from anyway?” he says.
Similar sentiments are voiced by Bob Neill, director of Seaview Consulting.
“With every merger or acquisition, how do you retain the benefits that both bring to the table, how do you get the alignment, how do you decide who’s running the show, the culture change?
“You need to have a really strong mandate for how you bring that integration to pass.
“Scale is going to drive businesses to do those sort of things, but you’ve got to manage that integration and implementation as the biggest challenge. It’s inevitable two businesses that have grown from individual beginnings will do things quite differently,” adds Neill.
He also suggests that in deals such as this, the term ‘merger’ may be something of a misnomer.
“A lot of people say the only successful mergers are takeovers [where you have] one clear set of principles and policy across the board.”
Neill believes that those companies undergoing a merger who say, “‘we’ll get together and work out the best bits from both businesses’ just doesn’t work in practice, you’ve actually got to have a very clear direction and execution.”
“Most are positioned as mergers so we don’t upset the stakeholders – they’re generally mergers of not equal partners, and that’s generally how it works best…you either join in, get on the bus and go on the journey, or opt out.”
He believes that a situation where both businesses seek to exert an equal level of influence in the merged entity is the worst possible outcome, “because you escalate the risks without adding the benefits”.
