Earlier this week, Foster Denovo announced it bought Kent-based advice firm Orchard Wealth Cultivation. Before this deal was announced, David Wilkinson, a senior parter at Foster Denovo, sat down with New Model Adviser® to explain its acquisition process.
Everyone pitched in when Foster Denovo bought Capital Partners in 2005. ‘We raised £2.5 million internally from all our staff and partners to do the acquisition. That was the start of Foster Denovo,’ says David Wilkinson (pictured).
More than a decade on from that first acquisition, Foster Denovo is looking to grow once again.
‘We decided about 12 to 18 months ago the infrastructure is too big for the size of the business we are, so we made an active decision to grow,’ Wilkinson says. The firm spent the past year or so talking to a lot of businesses about potential acquisitions. Wilkinson hopes there may be two or three deals completed over the first half of 2019.
However, Wilkinson says it is hard to steer away from the ‘consolidator’ tag. ‘We wanted to do the opposite of what consolidators were doing, so we adopted the term “facilitator”,’ he says.
There are a lot of advice firms out there with really good clients, Wilkinson explains. Owners are now reaching a point where they are assessing the next steps but are reluctant to approach a consolidator. Wilkinson says these business owners want to go somewhere where they know they can integrate their clients into another company, and at the same time carry on working there for as long as they want to.
‘We don’t believe that exists with some of the consolidators right now,’ says Wilkinson. ‘They’re buying businesses, they’re punching them into their propositions and are not really as bothered about what happens to the clients.’
What makes a business suitable for acquisition? Wilkinson claims culture is a big factor. The firm was created by a group of individuals with long-standing relationships.
Wilkinson is even godfather to the son of his colleague, equity partner David Stockdale. ‘That’s how the business has formed and evolved,’ says Wilkinson. ‘The culture of the business is very important for us. It’s the heart of the business.’
Foster Denovo put together a specialist team last year, which heads up acquisitions, to find firms that match its culture. ‘The decision to create this team came about when we became serious about growing,’ explains Wilkinson. ‘You can’t do business as usual and find the right businesses at the same time.’
Over the next two years, Foster Denovo plans to make a handful of acquisitions and has dedicated resources towards growing its ranks.
‘We’ve had some real success in finding new people to join the business,’ Wilkinson says. ‘Our recruitment executive, Paul Mattock, has done some fantastic work finding really good people.’
The long-term plan is to grow the business towards a potential public listing, with a target date of 2021.
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Tea or coffee?
Auntie Jill’s fry-up in Ireland.
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Adviser top tip
When setting up any business, it is important to understand the risks and rewards equally and apply the knowledge to all your business decisions. Be creative and innovative, understand your clients, what they require and define what sets you apart from your competitors at an early stage.