Nathan Jacobsen

Diverger has taken its second equity stake in an aligned practice, as a growing number of licensees deploy capital to become shareholders in their networks, rather than relying solely on licence fees.

The ASX-listed licensee network will take a 55 per cent stake in Melbourne-based advice firm Atkinson Saynor Private Wealth for a total consideration of $4 million. The deal follows a 35 per cent equity stake Diverger took in July 2022 in McGregor Wealth Management, a Queensland-based firm aligned to its GPS Wealth licensee.

The remaining 45 per cent stake in Atkinson Saynor will be held by David Saynor, an employed adviser in the business for the past 20 years who will now become principal of the Paragem-licensed firm.

Diverger managing director Nathan Jacobsen tells Professional Planner the deal is a result of the company helping with succession planning for an adviser who didn’t have the equity to outright purchase the business.

“We’ve got a longstanding Paragem business where the senior principal is retiring and the reality is, it’s difficult for the employed adviser who’s been with him for 20 years to actually buy that principal out,” Jacobsen says.

“What happens in that scenario is the whole business gets sold and not necessarily in the interest of the clients and the incoming adviser.”

The total purchase consideration for the firm, including Saynor’s share is $3.2 million, followed by a deferred payment of $800,000 eight months after completion which is subject to continued business performance.

Additionally, there is an earn-out incentive of up to $300,000 subject to further client growth.

By coming in as a shareholder rather than solely relying on a licensee fee, Diverger will support the business with coaching, mentoring an establishing a board.

“We help support the principal to buy their share and we work with them to transition the business over time,” Jacobsen says.

“It’s an opportunity for us to support the industry to help a business continue under the new generation.”

Following the theme of the Professional Planner Licensee Summit last month, the acquisition is part of a trend of licensees approaching different equity stakes to generate a sustainable revenue model in exchange for a commitment to driving the growth of the practices.

Veritas Securities equity analyst James Tracey noted stark contrast in valuations between licensees and other service providers like platforms, highlighting why licensees are taking different approaches to generating revenue based on the success of the advice practices.

“As a licensee, unless you step out and take an equity position, you’re not going to benefit from the upside so where’s the incentive to assist your practices in growing,” WT Financial Group founder Keith Cullen told the summit last month.