Paul Barrett’s AZ Next Generation Advisory is poised to complete its first investment in an accounting firm. The acquisition of the yet-to-be-named business is the first of what Barrett says will be a new facet of AZNGA’s strategy. It will be managed as a separate stream from the group’s financial planning acquisitions.
“We’re now strategically acquiring accounting firms where there’s an opportunity to work with our planning firms,” Barrett says. “It’s a pure accounting firm. We understand that integrating accounting and financial planning is difficult but, when done well, spectacular. We are investing in a foundation accounting firm, a big accounting firm, and we’re going to supply it with the capital to acquire other accounting firms.
“So [it will be] the accounting firm [not the financial planners] acquiring the accounting firms. And we’ll do those acquisitions in locations where there’s an opportunity to work together. We’ll manage those two streams separately.”
Barrett says AZNGA is also considering transactions in which it acquires 100 per cent of a financial planning firm at the outset, in an evolution of its initial strategy of acquiring a majority stake and buying out the remaining equity over time.
“There are three kinds of equity opportunity: minority stakes, majority stakes and 100 per cent,” he says. “There are quite a few more 100 per cent opportunities out there than you might think. So we’re going to do that as well.”
Barrett says these are typically situations where the business owners want to “take risk off the table. [They’re at] large firms where they want to sell 100 per cent of the equity but they want to stay”.
“It’s really interesting. I didn’t expect to find that kind of opportunity but we have. Those are valuable assets that we can introduce to our existing firms, and so on. There’s so much happening and we have to make sure we pick the right opportunities. There are so many.”
Barrett says AZNGA has now completed 27 transactions to acquire interests in financial planning firms with a total of about $4.3 billion of assets under management and about $40 million of revenue.
“We’ve got about 90 financial advisers across those businesses, about 200 staff,” he says. “We have a pipeline with about 10 to 15 transactions being worked on. We are basically working with each firm on its own strategic agenda. Some firms want us to grow them, so we’re giving them access to capital. We’ve done some interesting things around capital management.
“For example, were able to restructure the capital structure of firms. If they want to reduce debt, we can do that for them. We’ve had one of our firms in the past six months say to us, ‘We want to change our shareholding and we want to reduce debt.’ So we’ve done that for them, we’ve injected capital. We’ve also issued equity to firms that want to equity-fund new acquisitions.
“And in the most interesting development of all, we’re now solving succession for the next generation of talent. So we’re able to vendor-finance up-and-coming business owners into ownership.”
AZ Sestante
During March, AZNGA’s parent company, Italian investment and financial planning firm Azimut, launched an investment solutions business under the AZ Sestante banner.
“One of the major streams of opportunities for our firms is efficiency around portfolio management,” Barrett says. “The thing [Sestante is] doing for us is investment solutions. For example, we have a firm that specialises in UK pension transfers. There’s an opportunity for them to build their own Sterling-denominated find. They go to Sestante and say, ‘Can you give us a Sterling fund?’ Given the global connections Sestante has, they say yes. So we’re currently looking at sitting down and building Sterling-based investment funds for them.
“Another example is three of our firms are relying on [Australian Securities and Investments Commission] no-action letters for [managed discretionary account (MDA)] licences. In about a year, they expire. What do they do? Do they go and get MDA-licensed? Do they do a [separately managed account]? What do they do? Sestante sits down with them to work out what to do. So we use Sestante as an investment solutions provider.”
Sestante provides solutions to the broader market and Barrett says no firms in the AZNGA group are obliged to use its services.
“It’s not even about buying Azimut funds,” he says. “In fact, there are no Azimut funds involved in this. It’s investment solutions. It’s almost an implemented consulting arrangement.”
In late March, Azimut staged its fourth international conference, this year in Sydney.
“We had all of the countries around the world descend on Sydney – 450 people at the Four Seasons, “Barrett says. “There are 16 countries [represented], and Australia’s already the largest; we’ve built the largest international business they’ve got. We’re powering on.
“They’re very good at understanding that every local market has its own nuances and competitive environment. The models in each part of the world are different because, of course, the local market shapes the model. The model we’re building here is still unique.
“For our advisers, being in the same room and mixing with people from all over the world, with a solid agenda – it’s just a real eye-opener.
“We had paraplanners, client service officers, administrators, planners and business owners. We had every employee across every firm where we’ve invested in the room, [with people from] 16 other countries. It was incredible. It’s just the most diverse and deep financial planning get-together I’ve ever been involved with.”
