Practice acquisitions boosted by increased lender market

4 June 2014

More lenders have moved into the practice acquisitions financing space boosting activities by planners looking to buy other practices and taking advantage of stable practice prices according to Radar Results.

Radar Results principal John Birt said while the four major banks had continued to offer finance to planners, other bank lenders had re-entered the market.

"There has been a boost in the provision of loans in the past six to 12 months and is probably at its highest peak since the global financial crisis when planners could not borrow a cent," Birt said.

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According to Birt activity around practice sales had remained steady even after the backlog of acquisitions caused by grandfathering had cleared.

"There was a build up of transactions for the five months prior to the relief announced around grandfathering and those transactions flowed through in January to March. However the pace has continued on since then and has reached record levels," Birt said.

According to Birt this was due to the greater availability of financing to planners and was taking place despite prices for practices across the last 12 months remaining steady, except for books of business centred on corporate super clients and mortgage clients.

Birt said corporate super client books had dropped in value and were only achieving at best one times multiples of recurring revenue due to the implementation of MySuper.

At the same time mortgage client books had increased their maximum values from 1.9 times to 2.2 times multiples of recurring revenue due to demand by planners to access this client base and to find cross-selling opportunities associated with the younger clients in this demographic.

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