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Success through acquisition – a case study approach

Mergers & acquisitions are certainly a key talking point amongst financial planners right now. To reflect this, we’ve asked Louise Jeffreys, Managing Director at Gunner & Co., to share her insight into some of those firms which are active buyers of financial advisory and planning firms in the UK. We’ll be bringing you a series of case studies on this very topic during 2017.  

To kick off this new series, Louise talks to Newell Palmer, a regional IFA business based in the Midlands. It has grown to be the 49th largest IFA in the UK*, a position helped significantly through the acquisitions it has made over the last 5 years.

About Newell Palmer

Newell Palmer’s client-centred drive for growth is not a new thing. It has been at the forefront of their vision for the past 20 years, placing a real emphasis on the client in their development process. And whilst the business could always attribute significant growth to organic new business through referrals of happy clients & professional connections, they realised early on that scaled growth is most efficient through making sound acquisitions.

Roll on to today, the business now has over 40 successful acquisitions under its belt and offices in Wolverhampton, Bromsgrove & Nuneaton. This is proof enough that their model for growth works.

Here we’ll look at how they have developed their growth strategy. We will also look at what makes an IFA business an attractive proposition to buyers such as Newell Palmer.

The background

Newell Palmer was founded in 1993 by Philip Stepp. At that point, the business specialised in providing independent financial advice to the owners of small and medium-sized businesses. Back then, leads were generated via telesales and the cold calling of companies.

Gradually, more advisers were employed and the business started to grow. In 1997, the decision to partner with a local accountancy practice resulted in Newell Palmer’s first ‘joint venture’ being established; a business which was known as Lowe McTernan Financial Planning Ltd based in Rubery.

The success of the first joint venture saw increasing number of clients being obtained by cross referral from the accountancy side, generating increased levels of income. The firm built on this success with four additional joint ventures; Crombies Financial Services Ltd, Moffat Gilbert Financial Planning Ltd, KGJ Financial Services Ltd and MDP Financial Services Ltd. Each of these businesses were managed by a long standing Newell Palmer employee.

Over time, Newell Palmer took the decision to dissolve its joint venture companies, either through fully purchasing the businesses’ shares from the accountants, or in the case of MDP Financial Services Ltd, selling its interests to another IFA firm, who were looking for a ‘joint venture’ partnership.

Following the dissolution of its joint ventures, Newell Palmer set up offices in Bromsgrove and Nuneaton, moving the staff and client servicing operations to these new locations. In the case of Crombie’s Financial Services Ltd, this business was rehoused at the Newell Palmer head office in Wolverhampton.

From JV to acquisition

As part of their strategy to continually grow their business and increase client numbers in a more cost effective manner than just establishing more joint ventures, Newell Palmer then began exploring the acquisition of established IFA firms. They subsequently went on to purchase a number of IFA businesses in the years to come.

In 2006 Newell Palmer established Newell Palmer Trustees Ltd, a pension scheme administration company. At the time, Newell Palmer were providing the relevant support to clients but were using a third party to finalise the administration. Newell Palmer Trustees Ltd was incorporated to bring this function in-house and add economies of scale to both businesses.

Today, continuing that growth trajectory is an essential part of their future plans; “If you don’t grow as a business, you go backwards – and with ever increasing cost. Acquisitions are a great source of new clients and also a great way to add to our complement of competent advisers.comments Kevin Homfray, Newell Palmer’s Finance Director and lead of all the company’s acquisition projects.

Looking ahead

Newell Palmer’s commitment to growth continues for the next 2 years, with one of their key goals being  the addition of a further £200m of ‘on platform’ funds under management to take them to almost £1bn on platform funds.

First and foremost, they are looking for IFA businesses which are committed to putting their clients first. Their pledge when buying a firm is the promise to deliver the firms’ clients the very best whole of market service that is available.

They are particularly interested in financial advice businesses which operate within an 85-mile radius of Birmingham. Firms that have previously been acquired range from £30k to £2m in consideration, so Newell Palmer are keen to talk to any IFA within the 85-mile radius, which is currently managing clients’ investments and pensions.

One such acquisition was that led by Keith Barrett, who sold his business to Newell Palmer in 2012. Keith comments on his experience:

“In 2012, with my own retirement no longer a distant event, the priority for me was to move my corporate and private clients into an alternative professional environment that could deliver appropriate advice for them and to provide servicing support in the longer term. I was delighted when Newell Palmer agreed to acquire my pension consulting practice whilst, at the same time, I was slightly nervous about no longer ‘being in charge’.

I need not have worried! The transition was painless and relevant clients have been comfortably assimilated. In addition – and not unimportantly – I was paid all due sums (for my business) in a timely manner. It has been a pleasure to work with the team at Newell Palmer over the past three years. In just three months’ time, I shall be formally retiring and I am entirely satisfied that my clients have been left in good hands.”

Newell Palmer Key Facts

Year Established: 1993

Office Locations: Wolverhampton, Bromsgrove & Nuneaton

Turnover: £10.3M

Recurring Income: £7.9M

Funds on platform: £754M

Number of advisers: 31

I’ve worked with Newell Palmer on a number of M&A projects, most recently helping them with their acquisition of AbacusOne at the end of 2016.  Kevin is great to work with, his approach is incredibly straight and honest and you always know where you stand. When it comes to the business of acquisition, this is a characteristic not to be underestimated.

From my experience, Newell Palmer make fair valuations of businesses in the market, and they undoubtedly have significant experience which makes the process much smoother for the seller.

I’m pleased to say that Kevin is a very welcome participant in Gunner & Co.’s ‘Building Value in Your IFA Business’ seminar in Birmingham, hosting a round table for the last 2 years. He has also agreed to take part again this year, on the 28th September.

If you would like to know more about Newell Palmer’s proposition contact me on 0117 9926 335 or email  louise.jeffreys@gunnerandco.com

*Source, FT Adviser Top 100 Firms 2016