Planning sector M&A activity slowing
Mergers and acquisitions (M&A) activity within the financial planning sector is slowing and transactions already in progress are experiencing longer completion times, according to broker Kenyon Prendeville.
Director Stephen Prendeville said M&A enquiries to the broker slowed in the first three months of 2008 on the last quarter of 2007, while the average timeframe for transactions from market to settlement has pushed out from two to four months to four to six months.
Business multiples have stayed the same in the quarter, compared to last year, although recurring revenue or earnings before interest and taxes have declined, Prendeville said.
However, he predicts that in the absence of organic growth in the longer term, there will be even further demand for growth by acquisition, merger or joint venture.
“Whilst the increasing cost of funds may be an issue, it’s a small consideration given the future of the economic benefits of scale, volume override and aggregation.”
He added that the banks are “still lending and more are entering with cash flow financial arrangements tailored to financial services businesses”.
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