A year of M&A for licensees

18 December 2023
| By Laura Dew |
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2023 has been a busy year of mergers and acquisitions (M&A) for licensees as firms seek to take advantage of the improved landscape for financial advisers. 

Measures such as the Quality of Advice Review are in the process of improving the regulatory landscape for advisers, and adviser losses are slowing down. For those advisers who remain in the industry after the Hayne royal commission, high-net-worth clients and a supply/demand inequality mean they often have ample choice for future clients. 

As such, the landscape is ripe for M&A activity after a few turbulent years as the industry turns its head to the sunnier future.

Here, Money Management reflects on some of the biggest deals by licensees announced during the year. 

Count-Diverger

One of the biggest deals this year is the potential merger between Count and Diverger, which will create the third-largest licensee in Australia upon completion. 

The deal is expected to be completed at the end of February, and a shareholder vote is scheduled to take place on 23 February. 

Hugh Humphrey, chief executive of Count, said the deal is backed by major shareholder HUB24. There was a rival bid made by COG Financial Services, but this was later withdrawn as COG felt it lacked the support of Diverger shareholders. 

“The agreed deal is unanimously supported by all of their directors, including by HUB24 who is a major shareholder in favour of the transaction.

“The team and [Diverger managing director] Nathan Jacobsen have been great to work with. It makes sense, and everyone has been happy it is happening. 

“There have been a few false starts with acquisitions in this industry in the past so we wanted to ensure we had everything aligned and everyone was supportive before we went public. It’s unique to have all of those ticked off.”

COG Financial Services went on to take a 20 per cent stake in Centrepoint Alliance that it obtained from ClearView Wealth which exited its stake.

As well as the proposed Diverger deal, Count also acquired financial advice firm Affinia from TAL in May 2023 which added around 100 advisers to its ranks. It also took a 40 per cent stake in Bruce Edmunds & Associates in July, welcomed Queensland’s TISLife in August, and GHG Private Wealth in September.

AZ NGA

A bid to grow through “horizontal integration” has seen AZ NGA acquire various parts of the adviser value chain. This includes an outsourced HR firm called Catalina Consultants and a Melbourne accounting firm as well as multiple different financial planning practices. 

The firm executed 14 transactions: 10 by its member firms and four by AZ NGA directly. This includes the firm’s stake in Perth advice firm The Wealth Designers (TWD), its stake in Sydney-based financial advice firm Foster Raffan iPlan, and its strategic partnership with Rose Partners, a Melbourne-based accounting and advisory business.

Chief executive Paul Barrett told Money Management he expects the firm to quadruple in size over the next three to five years to create Australia’s leading professional services company, predominantly in the wealth sector. He also discussed the possibility of listing AZ NGA on the ASX in the future.

“We want to stand up as a large, sustainable player in the sector here in Australia and provide quality, profitable services to these thousands of small and medium-sized enterprises (SMEs) that had their tethers to the banks broken.”

Sequoia

Sequoia, which is one of the licensees to have seen the strongest share price growth in the past year, is also pursuing a horizontal integration strategy to help offer their clients professional services. 

It has also taken a stake in other financial services including a 20 per cent stake in Euree Asset Management, a new firm headed by former Australian Football League (AFL) player James Hird as chief executive. 

Sequoia said: “[Euree] will initially offer three fund options aimed at supporting financial advisers who want to reduce the cost of advice by accessing a single fund that has the intellectual property and know-how to select a range of investments under one umbrella across various asset classes to form either a balanced, growth or property-style fund.”

It also signed a heads of agreement to acquire and merge Castle Corporate and Castle Legal in June, and made a $2 million acquisition of a legal services provider called Australian Business Structures Pty in December.

Chief executive Garry Crole said the licensee is targeting 500 advisers within InterPrac and Sequoia Wealth Management by 2026, which it will achieve via small AFSL acquisitions. 

The firm said it is seeking to embark on this growth strategy at the current time because of commercial tailwinds from improved industry dynamics, enhanced leadership capability to drive earnings growth and a capital management program supported by strong balance sheet and compelling valuations. 

“For 20+ years, licensee services businesses have been competing on fees in competition with subsidised product provider AFSL holders, in the last 9–12 months as almost all providers have exited this subsidised price war which has abated,” the statement said.

“There is a shortage of advisers in advice, accounting and self-managed super fund (SMSF) administration to serve a community that is heavily weighted towards an age demographic that can pay for a service and needs assistance in managing their affairs.”

WT Financial 

One of the most recent acquisitions, made in mid-December, is the acquisition of Millennium3 (M3) from Insignia to WT Financial for $2 million. This has seen over 140 advisers move over to WT Financial, making Insignia lose its title as Australia’s largest licensee to AMP. 

“The acquisition further cements WT Financial as amongst the very largest financial adviser networks in Australia. We’re delighted to welcome the M3 cohort of practitioners and their support teams to WT Financial where they’ll find an ideal home – one where we know they can and will flourish at this time of unprecedented opportunity for advice professionals and advice network operators alike,” said Keith Cullen, WT Financial's chief executive.

WT Financial is one of the earliest licensees to start acquiring other financial advice firms as it acquired Synchron in March 2022 and Perth-based Sentry Group in June 2021. Having enacted so much activity already, the firm has ceased its formal M&A strategy but is open to opportunistic sales such as M3. 

As to what the landscape could look like going into next year, Cullen said he is encouraged by the activity being shown.

Reflecting on the busy M&A landscape, Cullen said: “What is driving this activity is everyone is recognising the opportunity that we saw back in 2018. People accused us then of being crazy as the banks were exiting the space, we got politely accused of ‘running into a burning building’ but we wanted to be counter-cyclical.

“All that corporate activity now, our own included, is people seeing the opportunity that advisers need and are looking for the right level of service and support from their network. We are delighted to see the activity and see the interest in the sector. It’s very encouraging.”

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