Acquisitive advisers need to do health checks
Some financial planning practices looking to acquire other businesses are not doing enough thorough background work on the financial health of their practice when they apply for loans, according to Alan Kenyon (pictured), managing director of Kenyon Partners.
“The number of sloppy and poor applications submitted for finance really doesn’t give the borrowers the best chance of achieving what they want to do,” Kenyon said.
While some of the criticism of the financiers was justified, a lot of the delay in getting loans approved was because people weren’t submitting their documentation in proper format at the one time, Kenyon said.
Practices that were giving incomplete data to the bank for loan applications were at risk of getting inflated or inaccurate loan estimates from the bank, he said.
Practices frequently did not have up-to-date financial information from their accountants, important documentation was left with their lawyers and not easily accessible, and they had no business plan, he said.
Practices had to think a little about their future strategy and budget forecasts, Kenyon added.
Kenyon Partners hoped to focus more on the post-sale integration of financial planning businesses, as well as more front-end work when financial planning businesses come to market, Kenyon said.
“The post-sale environment generally turns out to be a lot more work than people think,” he said.
If buying practices want to maximise the value of an acquisition, they have to think about communication and the handover of clients, as well as using a project manager to implement or integrate technology and administration systems, he said.
Kenyon and Steve Prendeville, former principals of merger and acquisition business Kenyon Prendeville, split last month.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
