Fund manager takes stake in Garnaut practise

Listed fund manager Australian Value Funds Management (AVFM) has taken a 40 per cent stake in planning firm Garnaut Private Client Advisers.

The deal follows AVFM’s purchase of 28 per cent of boutique planning practise Carroll, Pike and Piercy in January this year.

Garnaut will take a 17.5 per cent stake in AVFM and receive $3 million in cash.

AVFM director Lee Iafrate said the company was looking to buy stakes in two or three more practices.

“We are looking at high-quality, well-established advisory groups that have at least three years profitability figures,” he said.

“We are looking for a national spread of practises. The next acquisition will probably be in Melbourne and after that, an interstate practise.”

Iafrate said AVFM would always take a minority stake in practises and allow the principals to continue to work in the businesses.

“It is a way of providing succession planning for the principals and keeping the good staff in the business by offering equity,” he said.

“We don’t want key people to sell their practise and walk away as we want the principals to continue to provide the strategic thinking for the business.”

Iafrate said what AVFM was trying to do was the complete opposite to the consolidators’ model, where practices are fully bought and controlled. He said the owners of the practises in which AVFM has taken stakes will remain in control and under their own brands.

Garnaut managing partner Chris Garnaut said the sale of the stake to AVFM was to provide liquidity in the practice while retaining control.

“Basically nothing will change with the practice, the approved list will remain which has always used boutique fund managers,” he said.

“However, the directors of AVFM have a strong financial services background and Garnaut will leverage off that.”

Garnaut said the practice’s client base is mainly business people who generally have $1 million plus of investments. The deal has enabled his practise to talk to Carroll, Pike and Piercy about ways of handling direct-equity investments for Garnaut clients.“They have got some complementary capabilities which would be useful for us and we have some systems which they are interested in,” Garnaut said.

“I see the AVFM model as creating a loose group of like-minded practices which can work together. It is not an exit strategy for us.”

The Garnaut deal is subject to AVFM shareholder approval and a meeting is scheduled for late April.