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AFH Financial Group, a PLUS-quoted independent financial advisory (IFA) and wealth management firm, is actively looking for suitable UK acquisition opportunities to accelerate growth. The group, which raised GBP 1.8m when it joined PLUS earlier this year, is keen to take advantage of the proposed changes to the structure of the IFA industry and use its cash to target small partnerships and privately owned financial advisory businesses. “The focus will be on acquisitions during the second half of 2011. We’ve already identified a number of targets ranging from GBP 100,000 up to GBP 2m in size,” group Chairman and Chief Executive Alan Hudson told this news service. New proposals that will force IFAs to obtain further qualifications and increase the capital base of their businesses, are likely to throw up a number of acquisition opportunities, according to Hudson. “Around 70% of the IFA market is made up of small, independently owned firms where the owner is approaching 60 years old. A lot of these firms will find the increased costs and regulatory burden too much and decide to sell-out. That’s where we plan to take advantage,” he explained. The Retail Distribution Review is currently scheduled to come into effect from 1 January, 2013, but Hudson said he expected the group to announce a number of deals before then. “I would expect to announce some acquisitions this year." He said typical exit multiples for small IFAs were between 3x to 4x recurring revenues and that as a benchmark each financial advisor employed by the group should be able to generate GBP 100,000 in fees each year. AFH currently employs around 56 advisors. It generated revenues of GBP 2.58m in the six months ended April 2011. On an EBITDA basis, profits were GBP 416,000. The group has no debt. Hudson said that as the group expanded its IFA network it may look to branch out in other related areas of wealth management. The group currently has GBP 400m of funds under management. Hudson added that while a lot of research into potential acquisition opportunities was done in-house, the group would consider appointing a specialist firm of lawyers and auditors to help assist it on larger deals. In order to finance its expansion, Hudson said the group may require another capital raise. “Another equity issue is an option, but there are other alternatives we are looking at such as a loan note issue,” he said. The admission to PLUS in June was at GBP 0.80 a share, valuing the whole company at about GBP 11m. The group was advised by St. Helen’s Capital Partners LLP. by Malcolm Locke August 2011 |
