Acquirers on lookout for financial advice businesses

There has “never been so much cash floating around” but it is hard to find good opportunities for acquisition, especially in the financial sector, according to HLB Mann Judd.

The amount on company balance sheets had risen as companies hoarded cash during the pandemic but firms were now looking to put it to use, particularly as shareholders were becoming more vocal.

According to the firm’s annual M&A report, there were 1,207 deals completed in FY21 compared to 1,191 in FY20 but the transaction value decreased from $113.2 million to $88.6 million.

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Speaking to Money Management, Simon James, partner at HLB Mann Judd, said: “I have never seen so much cash floating around, more than in the dotcom boom. There is no shortage of cash from corporates and private entities and they need to spend it”.

However, it was harder in the financial services space, particularly as the pandemic uncertainty made it difficult to forecast future earnings based on historic ones which were skewed by Government stimulus. The financial sector saw fewer transaction deals in FY21 than in FY20.

“It has been harder to see what is going on in financial services, people are exiting the industry due to the increase in regulation and scrutiny which is making it harder on planners so firms are looking to fold into big firms,” James said.

“But we are finding there are fewer good opportunities [to acquire a financial firm] out there.”

As to whether it was a good time to sell a financial advice business at the moment, James said people had been nervous but the pandemic had less of a negative impact than people expected.

“It is always a good time if you have a buyer who can see the value in your business. There is always a deal to be done. This is a good time to consider your succession planning,” James said.

“I would be suggesting that now is not a bad time as there are definitely people who are looking to acquire a business. So long as they maintain confidentiality and find the right people to guide them through the process then now is not a bad time to get out of the industry.”

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Unless you really have to, why would you sell now? If your business is running and you've got everything in place to deal with annual opt in and FASEA/Education etc is behind you, why deal with some tire kicker and listen to how they'll pay you in shares and growth bonuses over the next 5 years with you still working in a business you no longer own? Pass!

Indeed, there is always another low baller just around the corner wanting to profit from my hard work. I don't even care about the CV any more. So long as the cashflow exceeds my needs, I divested capital away from the business risk (which is enormous thanks to ASIC) Years ago.

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