Backed by ‘significant financial horsepower’: AZ NGA chief on Oaktree deal

AZ NGA chief executive Paul Barrett has unpacked how its strategic partnership with Oaktree will take the professional advisory firm “to the next level”.

In an announcement on Monday, AZ NGA confirmed it has entered a strategic growth partnership with global investment manager Oaktree Capital Management, which has US$193 billion ($294 billion) in assets under management.

As part of the agreement, Oaktree will invest $240 million and become the largest shareholder of AZ NGA, while Azimut Group, AZ NGA management and current shareholders will continue to retain a strategic stake.

The firms will work together to accelerate acquisition activity and further cement AZ NGA’s position in the financial advice and accounting sectors in Australia.

In conversation with Money Management, Barrett shared that the deal has been in the works since February. With Oaktree already owning several stakes in the global financial services landscape, such as UK financial advice company Ascot Lloyd, its partnership with AZ NGA strengthens its presence in the Australian market.

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Based in Los Angeles, Oaktree first opened an Australian office in 2016, which is led by managing director Byron Beath.

Barrett explained: “It was a case of trying to find the right partner in Australia for them to deploy their financial resources. They were looking in the market for the right partner and we were looking for the right capital partner at the same time.”

Now as AZ NGA’s largest shareholder, Oaktree and its access to vast capital will enable the financial advisory group to continue sustaining the growth ambitions of its 34 partner firms.

“We now have one of the most respected investors on the planet – it’s an absolute privilege for us to have Oaktree. It means that we now have significant financial horsepower and significant know-how to go about the rest of our work. That means taking what we’ve built over the last decade to the next level,” the CEO said.

In particular, AZ NGA remains focused on inorganically growing the advice practices already operating within its network by identifying M&A opportunities. Barrett also hinted at additional M&A deals on the larger end of the spectrum in the near future.

“The firms that we have invested in over the last decade are quality operators who have big aspirations. We want to give them the access to debt and capital and know-how to be able to do that, so you can expect us to invest a lot more in the firms we already have a portfolio in,” he said.

“We will still invest in other [new] firms, but the strategy really is to help those firms realise their ambitions, as well as other larger scale M&A.”

Another major deal AZ NGA recently announced was that it would be acquiring stakes in 16 advice practices from AMP for $82.2 million, with the intention of helping those practices with their M&A goals.

The AMP transaction and AZ NGA’s partnership with Oaktree are both expected to reach completion by the end of the calendar year, with Barrett forecasting 2025 to be another active year.

“Both the AMP deal and this deal is just the end of the beginning. The real work will begin in 2025 and we have other large, transformational deals that we tend to do. So, 2025 is shaping up to be a big year,” he said.

Advice as an ‘end in itself’

Reflecting on the significance of AZ NGA’s partnership with Oaktree, Barrett noted that the level of interest in the Australian advice sector from international investors is at an “all time high”.

“I’ve never seen such interest in that space – it’s really encouraging. It just shows you how we’ve turned a corner as an industry and that life post-Hayne royal commission is as a professional services industry,” Barrett said.

Prior to the royal commission, the chief executive said that advice businesses were often viewed as a distribution vehicle tied to product providers, which he has sought out to change.

“I’ve been on a bit of a mission for a long time now to try and change that and do something to put the advice at the top of the value chain. We’re not distribution, [advice] is no longer a means to an end – it’s an end in itself,” he said.

“It’s a credible, viable, financially strong industry that is flourishing. Finally being regarded as such is the single most satisfying thing about this whole project.”

The chief executive concluded: “[Advice] is no longer seen as something that’s tethered to product. It is a viable profession whose prospects have never been better.”

Barrett’s sentiment aligns with Rhombus Advisory CEO, Darren Whereat, who recently detailed to Money Management how the firm is supporting the growth aspirations of its advice network, three months after its separation from Insignia Financial.

Commenting on the shift away from its institutional ties, Whereat said: “What we’re seeing now is a genuine profession where businesses are standing on their own two feet. I think what you’ll end up with is a far greater respect, if you like, from the consumers of advice, to say that this business is just advice.

“We got the opportunity to separate ourselves from a product manufacturer, if you like, to really make sure advice stands alone as our business – that is the only business that we’re in.”