The chief executive of AFH Wealth Management has revealed that the firm has received several approaches from IFAs looking to sell their businesses.
Alan Hudson was speaking to International Adviser after AFH released its results for the year ending 31 October 2018, which showed earnings before interest, tax, depreciation and amortisation (Ebitda) rose 85% to £10.4m ($13.4m, €11.8m) from £5.7m in 2017.
Funds under management reached £4.4bn, up 58% from £2.8bn. Revenues were up 51% to £51m from £34m, of which £6.1m was organic growth.
Hudson told IA: “There have been several firms within the last year that have approached us directly about deals.
“We are now in a position where we are approached by business looking to sell. We also have an education website which talks potential vendors through the process of selling, which helps.”
During the firms 2018 financial year, AFH completed 16 acquisitions with a combined purchase price of £34m.
It has already completed its first deal of calendar year 2019, with the acquisition of financial planner Hayburn Rock Group and its subsidiary companies, based in Stourbridge, West Midlands.
Rejection
Hudson was asked if AFH has a criteria for potential acquisitions, and what sort of firms it would reject if a deal was put before the business.
“We have a process, but the most important thing is that we look for businesses that have a culture similar to our own,” said Hudson. “We look at vendors for whom the client proposition is equally as important than to amount of money they will receive for a business.
“If there was a massive amount of certified benefit transfer work compared with normal financial planning, we would be less interested in the business.
“We are also not keen on the use of structured products. There is an awful amount of structured product work being done by advisers.”
Growth
AFH announced its three business targets to be achieved in the next three to five years:
- FuM of £10bn;
- Annual revenues of £140m; and,
- An underlying Ebitda margin of 25% on revenue (underlying Ebitda margin increased to 21% in 2018 from 17%).
Hudson said: “We are not going to be changing our model. But we anticipate it will be a combination of organic and inorganic growth.
“The problem is about forecasting on acquisitions because it is reliant upon access to capital and no changes in terms of values going forward.
“We say it is an aspirational target rather than a hard target because we cannot guarantee that we will be able to make significant acquisitions to make it.”
The firm also said in its results that it wants to become the number one financial planning-led investment manager in the UK.
“What we are not saying is that we want to be biggest, but we do think that the overall wealth management sector will polarise between investment-led and financial planning-led investment management, and as that becomes clearer will want to build the space in the latter as number one,” said Hudson. “But that is not to be the number one by size but becoming a trusted and well-known brand within the sector.”
Future
Speaking on the future of the firm, Hudson said AFH is not looking to target specific areas within the UK, but said it has “the knowledge that as we do more, we will have a geographical coverage”.
He also said that AFH has “the capacity to continue doing deals and we anticipate that there will be more to come”.
“I would like to do more of the same,” Hudson added. “I am very loathed of targeting the number of acquisitions or advisers we recruit.
“I would rather a direction of travel and do the job well and see where we end up at the end.”
The firm announced that earnings per share was up 43% to 16.0p (2017: 11.2p), underlying earnings per share up 34% to 22.7p (2017: 17.0p) and dividend per share up 50% to 6.0p (2017: 4.0p).
