Perpetual launches advice business acquisition program

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Perpetual is embarking on a program of acquisitions in the high-net-worth advice space despite last week announcing its 2009 half-year profits had almost halved.

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Chief executive David Deverall said the wealth manager would be looking to expand market share in the sector by acquiring small dealer groups/advice firms that represented clients with balances of $500,000 or more.

He told Money Management Perpetual’s focus is very much on businesses with funds under management of up to about $1 billion that might otherwise go out of business in current market conditions.

Potential targets would be those firms “with revenues that have come off, with profits that have come off, that have a valuable customer franchise but are unfortunately not making money, or making a lot less than they used to”.

These firms would also have similar business models in terms of having “similar target customer groups, salaried advisers [who] are not paying on commissions and have not built client portfolios through margin lending”.

Deverall predicts “some dealer groups/advice firms will go out of business in the current cycle”, but said these failed firms would not be targeted by Perpetual for acquisition.

“A large number of other firms have genuine values in their business but unfortunately their model is subscale under current conditions — and these are the sorts of companies we will be interested in talking to.

“We think we have sufficient scale in order for those sorts of businesses [to] become very viable again as a part of Perpetual, even at current market levels,” he said.

Deverall would not confirm whether there are any acquisitions in the pipeline, saying “we are approaching them and they are approaching us”.

The group is “not interested” in buying any funds management businesses, he added, despite these being subject to the same market forces as advice firms.

“We think that as these firms shut up shop there will be some talented individuals who are available in market and we might recruit some of these individuals into our funds management team.”