Prime Financial steps up the game on M&A
Prime Financial has flagged larger transactions will become a hallmark of its M&A strategy moving forward, as it seeks to step away from its “sleeping giant” reputation.
Earlier this week, the firm announced it had entered into a binding agreement to acquire investment research and fund management business Lincoln Indicators.
Lincoln Indicators – which was founded in 1991 – has 3,300 high-net-worth clients that access a range of research services and proprietary managed funds, with $600 million in funds under management (FUM) and 30 staff.
It currently runs three managed funds investing in US and Australian equities, and a Stock Doctor investment service to help self-directed investors with quantitative research.
The total consideration is $15.7 million for on-target EBITDA performance in four tranches, or $17.9 million if earning targets are outperformed.
The transaction is set to increase Prime’s total FUM by nearly 50 per cent, from $1.3 billion currently to $1.9 billion once completed.
Prime’s M&A activity includes the acquisition of alternative asset management firm Altor Capital in February 2024 and Equity Plan Management (EPM), which offers remuneration and employee share plan administration services, in July 2024. It also acquired SMSF administration service provider Intello in October 2022.
With annualised revenue of $10–$11 million, the Lincoln Indicators deal represents a “step up in size”, the firm stated, compared with previous acquisitions having revenue of $2–$3 million.
In terms of price, the Lincoln Indicators deal is substantially larger than Altor Capital for $1.5 million and EPM for $5.7 million.
Speaking on a webinar following the announcement, Prime’s managing director and chairman, Simon Madder, said the company is eager to complete further transactions of this larger nature.
“Larger transactions will become a hallmark of what we’re doing and to some extent, we’ve been a little bit of a sleeping giant over the last two to three years with respect to building out that capability in that shared service model,” he remarked.
“Although we’ve been in business for the last 26 years, it’s really the last three to four years where we’ve really started to accelerate. It doesn’t mean we won’t do a transaction that’s got $5 or $6 million revenue, but we’re equally talking to some that have $13 or $14 million in revenue.”
Prime’s operating model comprises two key divisions: its business segment and wealth segment. The former offers accounting and business advisory, alongside capital and corporate advisory, while the latter provides wealth management, asset management and SMSF services.
Madder noted that Lincoln Indicators is a general advice business providing investment research and managed fund solutions, rather than being a fully fledged financial planning practice.
“This isn’t a business that’s doing full financial planning. It’s saying, ‘Here’s some research, these are our best ideas, would you like to subscribe to that and make your own decision? Or if you don’t want to make your own decision, would you like to invest in these managed solutions here?’ he explained.
“We’ve intentionally chosen something here that plays to our strengths. We picked something that we felt was appropriate, fits with our culture and direction, and the right valuation. It’s a little bit different than what you would typically see.
“We’re not necessarily looking where everyone else is because what we are trying to do is to create one totally connected business. We are not a roll-up strategy. Everything we do needs to sit in the middle of the business.”
PwC research earlier this year found global asset and wealth management is expected to see further M&A activity in 2025, with deal values in Asia-Pacific rising more than 70 per cent in 2024.
Large wealth management players are also taking an increasingly opportunistic approach to M&A deals, according to Pitcher Partners, while a fear of missing out (FOMO) is driving smaller players to consider selling amid a heated environment.
AUTHOR
Jasmine Siljic
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