Diverger has offered a proposal to acquire Centrepoint Alliance which would create the third largest licensee behind Insignia and AMP.
The move was announced to the ASX on Thursday night which would see Diverger acquire all shares in Centrepoint after a short period of due diligence, regulatory approval, and approval from the Diverger board.
Diverger chief executive Nathan Jacobsen tells Professional Planner bringing scale gives them the market leadership position behind AMP and Insignia, although they still operate a different strategy.
“Our strategy is different; it’s a services strategy. Whilst having that scale is important it gives us the capacity to invest in other services. That’s our strategy. We really see our role as providing the infrastructure to advice and accounting firms to grow and prosper.”
Jacobsen says commentary that Diverger is taking on a larger firm is not correct.
“Whilst [Centrepoint] has a larger number of advisers, the financials of the respective businesses are both generating similar earnings. We have a similar amount of staff and when you normalise for cash on their balance sheet our enterprise values are very similar. We’re actually a merger of two very good businesses into a new market force.”
According to the most recent figures from Wealth Data, Centrepoint has 521 advisers while Diverger has 464.
Insignia is home to the most advisers in the industry with 1,148 while AMP has 1,073.
The 985 combined adviser total will put Diverger ahead of the merged total for WT Financial Group and Synchron which would’ve previously become the largest non-institutionally owned licensee with over 600 advisers.
Wheels in motion
In the ASX announcement, Diverger stated the proposal provides “compelling benefits” to Centrepoint’s stakeholders and the combined group will benefit from a market leading position.
“An expansion of core client services utilising the skill and expertise of both Diverger’s and Centrepoint Alliance’s existing operations team and combined product offerings; a platform for enhanced market liquidity for both organisations; and a shared ability to leverage the technology capability and learnings from Diverger’s technology partnerships.”
The 32.5 cent per share offer price represented a 29.8 per cent premium to Centrepoint’s Volume Weighted Average Price for the six months to 22 June 2022.
Jacobsen says Diverger partnered with Thorney Investments to agree to a price which was pitched to Centrepoint.
“The strategic rationale here is fairly obvious; we’ve got two companies that provide similar services who are similar scale; we’re both generating around $8 million in earnings and we both focus on expanding services to advisers and accountants so it’s a natural fit.”
Benefits of scale
By merging together, Jacobsen says, it provides the ability to invest more into technology and help what is a challenging operational environment for licensees and advice practices.
“What the scale brings is capacity to invest. With the withdrawal of the large institutions from the market many of the service providers are small companies who have limited resources not dissimilar to the advice practices themselves.”
Scale has been the common thread throughout financial services whether it is advice practices, the large institutional advice networks, platforms or superannuation funds.
“By bringing together the forces of our two companies we bring substantial earnings, cash flow and much stronger capacity to invest in the underlying infrastructure of the industry and help advisers run better businesses,” Jacobsen says.
Diverger was previously known as Easton Investments Management and holds the licensees for Merit Wealth, GPS Wealth, Paragem and the SMSF Expert.
Centrepoint previously acquired ClearView’s wealth arm last August which included Matrix Planning Solutions and Clearview Financial Advice which helped ClearView separate its product and advice businesses.
