Centrepoint has set its sights on expanding its salaried advice channel, with a deal worth up to $10 million* to acquire 100 per cent of Queensland-based advice practice Financial Advice Matters.
Announced to the ASX on Thursday morning, funding for the binding agreement will be partly drawn from Centrepoint’s cash reserves as well as the $10 million newly-established debt facility with NAB.
Most of the deal (80 per cent) will be paid up front with the remaining 20 per cent subject to deferred incentives and performance hurdles over a 12-month period based on minimum earnings before interest and taxes (EBIT) contribution of $1.5 million.
Centrepoint CEO John Shuttleworth tells Professional Planner that because FAM has been an authorised representative, they knew the quality of the business.
“It’s a corporatised business, so it’s got over 30 employees, 14 financial advisers, it’s got all the systems, processes, infrastructure to enable us to scale the business further,” Shuttleworth says.
“From our perspective, the salaried advice channel is a profitable segment of the market and we’re interested in expanding it for us. Rather than investing and taking a strategic stake in practices, I would rather acquire businesses and trying to grow that channel through acquisitions.”
The announcement touted FAM’s full range of financial planning and advice services to approximately 1450 clients with funds under advice over $1 billion.
It operates eight offices in Queensland, generating revenue of $6.1 million in FY23.
A corporate authorised representative of Centrepoint subsidiary Alliance Wealth since 2015, Shuttleworth describes FAM as a “complimentary business that just fits really nicely” because the organisation has already been operating with salaried planners for the last decade – albeit on a smaller scale – the addition of the group increases the salaried adviser numbers from five to 19.
“We now have an employed channel, we have a licensee business where we’ve got over 500 advisers and then we’ve got over 200 practices within the self-licensed business as well so we’re covering the three pillars of employed, licensed and self-licensed as part of the offering,” Shuttleworth says.
Centrepoint expects the full year EBIT contribution of FAM to be in the range of $1.1 million to $1.5 million in the first 12 months of operations.
“A lot of advice books are trading on healthy multiples of 2.5-3.5x revenue,” Shuttleworth says. “Being a listed a company that trades on more of EBIT multiple is something that is financially viable for us to do whereas some of the smaller practices are more challenging based on the multiples they’re trading on in the market.”
The deal is expected to complete by 1 December, subject to fulfilling all necessary conditions.
*This article was edited on 10 November 2023 to clarify the purchase price is up to $10 million, not $20 million with part proceeds being used from Centrepoint’s cash reserve and $10 million debt-facility.
