Clime Investment Management has signed a $2 million exclusive, binding heads of agreement with Infocus to sell off its troubled licensee business Madison.
Announced to the ASX on Monday morning, Clime said the move would streamline operations to a focus on its $1.3 billion (in management and advice) funds management and private wealth business, while benefiting from cost efficiencies which will produce approximately $500,000 normalised operating profit improvement.
Sold along with platform WealthPortal, Infocus managing director Darren Steinhardt says a catalyst for the deal was the common licensee refrain of the need to gain scale to drive business efficiency.
“We are wanting to expand and if I look at the cultural fit that is there between the advisers that are within the Madison network and ourselves, it’s a good and strong fit,” Steinhardt tells Professional Planner.
“There’s a lot we can do with those advisers when welcome them into our network and make them feel at home.”
Clime CEO Annick Donat did not respond to request for comment by time of publication.
It’s the second attempt this financial year by Clime to offload the Madison advice business after signing a non-binding heads of agreement with Practice Development Group, which represents Godfrey Pembroke advisers, last year.
That deal would have created a co-operative ownership model between Madison and Godfrey Pembroke after the latter’s then-owner Insignia Financial announced the licensee would be sold back to its advisers. This was part of a broader plan announced by the institutional licensee owner to the market that it would divest most of its licensee businesses.
The potential deal with Madison and Godfrey Pembroke had a deadline of March 2024 and ultimately fell through because “it was apparent that both parties had stuff that they needed to deal with”, according to Godfrey Pembroke CEO Mark Fisher.
PDG and Godfrey Pembroke director Trevor Brandson tell Professional Planner that GPL was “more advanced in [our] thinking of what the future could look like” for an adviser-owned and adviser-led licensee than Clime.
“For Clime, considering the sort of opportunity that we had, [it] was very fresh thinking for them, and they… hadn’t had the lead-up time to really understand what that could mean for them, their businesses and their clients. We were a long way down the path and just weren’t in a position for them to be able to come along and catch up. It was more of a timing issue.”
The merger of the Madison and Infocus networks would increase adviser numbers to more than 200, boost funds under advice to more than $16 billion and increase in-force risk insurance premiums to around $210 million.
Madison currently has 54 authorised representatives in 32 financial advisory practices.
The deal is expected to be completed by the end of the financial year, pending conditions being met after the completion of due diligence.
Steinhardt says minor due diligence analysis commenced before the deal was announced.
“Conversations have been going for a little bit of time and there has been a bit of initial DD done so we could get to the point where we could make this announcement,” Steinhardt says.
“We’re quite happy with what we’ve seen and what we know about the business. The next few weeks will see the rest of it come together.”
The $2 million deal will be paid for by convertible notes issued by Infocus with a three-year term and 8 per cent p.a. coupon payable half-yearly.
Clime will have the option to receive a cash redemption or convert the notes into ordinary shares in Infocus.
Steinhardt says the interest in WealthPortal was because it is not only what Madison advisers have been using, but advisers in the Infocus network also use it.
“We have a broader technology suite which does include a platform so that’s a part of what we do,” Steinhardt says.
“It’s really how the platforms – or the platforms we choose to partner with – are integrated effectively into our overall ecosystem and how we can really drive operational efficiencies out of that.”
