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Details emerge on Standard Life's advice firm offer

Details have emerged about how Standard Life assesses advice firms it buys.

Details emerge on Standard Life's advice firm offer

Details have emerged about how 1825, the Standard-Life owned restricted national advice firm, evaluates the firms it acquires.

Standard Life has acquired four well-known IFA firms over the past 12 months as part of its plan to establish regional hubs across the UK. 

In February 2015 it acquired Leeds-based Pearson Jones. Since then it has also acquired Norwich-based Almary Green, Glasgow-based Munro Partnership and London-based Baigrie Davies. Standard Life did not reveal how much it paid for these businesses.

At an investor day earlier this week Standard Life was pressed for details on how much it paid to buy the advice businesses.

In response, Standard Life’s chief financial officer Luke Savage did not reveal any exact figures but described the deals as ‘very, very small’ and ‘typically low single digit millions’.  

Savage's answer suggests Standard Life is not paying over the odds to buy advice businesses.

Rival life company Old Mutual Wealth paid £98 million to acquire network Intrinsic in February 2014, although this included far more advisers. 

The largest acquistion made by consolidator Bellpenny to date is the £10 million purchase of Torquil Clark from Skipton Building Society. 

Valuation model

Speaking to New Model Adviser® Almary Green managing director Carl Lamb shed further light on how Standard Life values firms.

The key measures 1825 looks at are:  

  • earnings before interest, taxes, depreciation, and amortization (Ebitda);
  • assets under advice/ client remuneration;
  • recurring revenue;
  • cashflow

Lamb said assets under advice or funds under management were particularly important. The above measures are 'triangulated' to form a picture of the business. 

He said that when his own firm went through the acquisition process it took six months and involved handing over 21,000 documents.

Lamb also said cultural fit was important and had been a key consideration for him deciding whether to join 1825, as well as for the national deciding whether his firm was right.

Previously a proponent of independent advice, at the time of the deal Lamb said regulatory changes, rising risks and costs to the business meant a majority of firms would move to the restricted model over the next five years.

Future plans

Standard Life is looking to make further acquisitions as it expands its advice arm. Last year 1825 chief executive Steven Murray (pictured) said he eventually wanted 150 advisers to be part of the firm.

In March he told New Model Adviser® the national looks at 'the potential growth within the firm, the quality of the control environment, recurring revenue and profitability' among other factors.

He said the firm aims to become chartered, though it was not 'an absolute pre-requisite of the firms we acquire'.

Murray also said it was not paying out 'big chunks' of equity, but based its deals on a cash consideration and buyout structure. 

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