Announcing on the same day that it has placed 749,303 new 5p ordinary shares to raise £674,000, the wealth manager said it will pay Compass a maximum of three times its recurring income for the 12 months following the completion of the deal.
According to the group, the payment will be made in two tranches. “an initial tranche, payable on completion, of £539,150, to be satisfied half in cash, being £269,575, and half in 269,575 new Ordinary Shares at a price of 100p per share.”
The remainder of any consideration due will be similarly satisfied half in in cash and half in new ordinary shares.
“While small, it will not only strengthen our presence in the Group Personal Pension scheme market ("GPP") where we see significant opportunities domestically, but also allow us potentially to leverage our Investment Management services to Compass's clients, said John Morton, European Wealth chairman said in the statement to the stock exchange.
He added, that the group also sees significant scope for improving Compass's operating costs while at the same time continuing to grow overall funds under management and influence.
Speaking to Portfolio Adviser, Morton said that the group continues to look at a broad range of acquisition targets in a bid to broaden its offering, but says the culture of the business is very important.
“The aim is to become an all-encompassing wealth manager, a single point of advice. The firm also has all of its back office functions in house which enable s us to better control the quality of output,” he said.
But, he added: “On the basis that we are doing everything in house, our fixed cost base is quite high at the moment, so part of the strategy is building up our scale. But, it is not going to be done by chasing funds under management, it needs to be done by choosing the right businesses that fit the European Wealth culture.”
Currently based in Surrey, European Wealth said the family-run IFA business with approximately £31m of funds under influence will relocate to European Wealth’s London office.
In the year to December 2013, Compass had turnover of £434,230, of which approximately 76% was recurring income, and recorded a pre-tax profit of £154,250, European Wealth said.
