AFS sees slow rate of financial planning practice acquisitions
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A slow acquisition period for financial planning practices in the second half of 2009 may be the result of principals sitting back to see what eventuates in the market place in 2010.
The second half of 2009 was the worst period for acquisitions for Australian Financial Services Group (AFS), said CEO and managing director Peter Daly.
The group engages active recruitment for larger practices with about $500,000 average income, and has in the past had an acquisition rate of 20 a year. But Daly said the July to December period was the worst recruitment result that AFS has ever experienced, with only five new practices successfully recruited.
Daly said one of the reasons might be that practices are not interested in growing, but he believes a large part of it has to do with principals waiting to see what happens in the new year.
Daly said one of the key benchmarks they set for an acquisition is ensuring that the business is genuinely interested in growing - the aim is that a practice will double in size within three years of the deal.
"There are a few people out there who - maybe for lifestyle choices - do not want to double the size of their practice," he said. "They may be one-man band organisations that are very comfortable earning whatever they are earning and for various reasons that's their comfort zone."
However, he said a number of dealerships are going through some challenging times (such as PIS and Count that are going through a potential listing) and asserted that perhaps practice principals are waiting to see where the opportunities lie.
"A number of dealer groups are going through some interesting times and I guess there is a degree of uncertainty in the market place," he said.
"We've got organisations like PIS and Count going through an interesting time, there are a number of organisations going through some interesting variations and I think a number of practice principals are sitting back and thinking that if they stay, they might see a significant increase in their share value.
"So I think people have been sitting back to see what happens, and certainly from our perspective it is more difficult than in the past to bring people over," he added.
But Daly expects things to improve in 2010 and is once again aiming for 20 acquisitions over the year.
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