AZ NGA’s Barings deal allows its larger practices to grow
AZ NGA’s CEO has unpacked how its recent $345 million debt facility will accelerate the growth ambitions of its advice network and what it says about the broader sector.
It was announced last week that global investment manager Barings acted as joint lead arranger – alongside Ares Management Corporation and Macquarie Bank – of a $345 million senior secured credit facility supporting financial advice and accounting group AZ NGA.
The debt deal came alongside the existing $240 million investment the group received from Oaktree Capital Management last December, making it AZ NGA’s largest shareholder.
Speaking to Money Management following the Barings announcement, AZ NGA chief executive Paul Barrett explained how the institutional debt facility will benefit its partner firms through access to additional capital.
“One of the things that the CEOs and founders who run large financial planning and accounting firms tell us is that if they’ve got an aspiration to grow $50 million revenue companies or $100 million revenue companies, they’re constrained by the amount of debt that a commercial bank can lend them. A lot of these super firm owners need an institutional style of debt facility,” Barrett said.
“They can’t get access to the funding they need from just a commercial bank. The institutional grade debt facility, which is what we have now established, means that our firms have now got access to a balance sheet that will enable them to build those $50–$100 million revenue practices through a combination of equity investment by us and prudent use of debt.”
The CEO described the debt facility from Barings, Ares and Macquarie as the “first of its kind” in the advice sector in terms of the size and scope of the deal, which AZ NGA intends to use to fuel the growth of its partner firms.
As AZ NGA looks to triple in size over the next three to five years, Barrett said this ambitious goal will be achieved via a combination of four growth levers: margin expansion, organic growth, mergers, and acquisitions.
He added: “We now focus a lot more on partnering with the CEOs of the firms we’ve got and helping them grow. That doesn’t mean we don’t do new deals, we do, but the opportunity to properly set up those super firms for growth is what we see as very low-hanging fruit.”
Overseas firms eyeing Aussie wealth managers
The deal also reflects broader interest from global players in the Australian wealth management space at the moment, Barrett said, similar to the bidding war to acquire Insignia Financial. However, this interest won’t last forever, he warned.
“Barings and Ares in particular, like a lot of global institutions with capital, are very interested in the wealth management sector in Australia. When we raised capital last year with Oaktree, there were a number of other players very keen to enter the sector and that’s what’s so hot.
“You only need to look at what’s happening in the Insignia situation to see that there’s quite a lot of demand by foreign investment companies for Australian wealth management assets. I think that cycle will continue for a little while longer. It won’t last forever, but while it is on, we intend to make the most of that.”
Ultimately, the advice market is finally getting the recognition it deserves, the chief executive argued, as an end in and of itself rather than as a distribution vehicle.
“I think Oaktree’s investment, Ares and Barings, their backing of this advice platform is the evidence that we all need to help us understand that we’re the real deal, the value chain is absolutely being turned on its head, and advisers and accountants who are closest to the client are now finally being valued accordingly,” Barrett said.
“This is the best time to be in our sector and there’s going to be a lot of value to be created for clients, for employees and for shareholders. I think these sorts of moves by global firms are validating that.”
AUTHOR
Jasmine Siljic
Recommended for you
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
With many advisers preparing to retire or sell up, business advisory firm Business Health believes advisers need to take a proactive approach to informing their clients of succession plans.
Retirement commentators have flagged that almost a third of Australians over 50 are unprepared for the longevity of retirement and are falling behind APAC peers in their preparations and advice engagement.
As private markets continue to garner investor interest, Netwealth’s series of private market reports have revealed how much advisers and wealth managers are allocating, as well as a growing attraction to evergreen funds.
