acquisition of financial management services pty

.................................................................................................................................Investor Group Limited ABN 93 006 650 693
Nauru House, Level 31, 80 Collins St, Melbourne Vic 3000
PO Box 18397, Collins Street East, Melbourne Vic 8003
Telephone 03 9911 6400 Facsimilie 03 9650 7199
www.investorgroup.com.au
Accountants & Advisers
2 February 2005
The Manager
Company Announcements Office
Australian Stock Exchange Limited
By Electronic Lodgement
ACQUISITION OF FINANCIAL MANAGEMENT SERVICES
AND COMPLETION OF C.E. SMITH TOWNSVILLE ACQUISITION
ACQUISITION OF FINANCIAL MANAGEMENT SERVICES
The directors of Investor Group Limited (“Investor Group” or “the Company”) are pleased to advise that the Company has reached agreement to purchase Financial Management Services Pty Ltd (“FMS” or “the firm”).
Background
FMS carries on a specialist financial planning business and currently has funds under advice of approximately $150 million.
The firm was established in 1989 as a joint venture between the Adelaide based accounting firm PfA Chartered Accountants and Andrew Macdonald.
The firm has operated under its own dealers’ license since its formation and presently employs 4 senior advisers and a specialist risk adviser, with annual turnover in excess of $1.5 million.
A substantial portion of clients’ funds are invested through the Symetry Master Trust, providing a relatively high level of recurring income.
Merger Plans
The expressed intention is to merge FMS with Prescott Consultants Limited (“Prescott Consultants”), thereby increasing funds under advice within the combined business to approximately $1.75 billion.
The relocation and integration of the FMS business into the Adelaide operations of Prescott Consultants is expected to give rise to significant benefits of synergy, including the rationalisation of licensing and related costs, together with the consolidation of administrative and corporate functions.
Under the merger arrangements, FMS’ key advisers and risk specialist will join Prescott Consultants as full time employees. This will bring the number of advisers and risk specialists in Prescott Consultants to 27.
Transaction Details
The transaction involves an up-front consideration of $1.80 million, which is to be satisfied by cash of $1.30 million, together with the issue of 133,334 Investor Group shares at $3.75 each. A further amount of $250,000 is payable on or around 30 September 2006 subject to nominated revenue performance targets being met.
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The cash component of the sale consideration will be funded from surplus cash and/or undrawn bank facilities following the capital raising completed in November 2004.
Under the terms of the FMS sale agreement, which was executed today, the transaction is effective from 31 January 2005.
General Comments
The directors regard FMS as an excellent acquisition as it further strengthens the Prescott Consultants business, in both the advisory and risk areas, and enhances its growth and profit potential.
This transaction will consolidate Prescott Consultants’ position as the largest full service advisory firm in South Australia and will support on-going brand and systems development to achieve operational and scale efficiencies through technology and process improvement.
At a group level, funds under advice now exceed $5.0 billion, affirming Investor Group as one of Australia’s largest non-affiliated financial planning groups.
It is also the fifth largest accounting group in Australasia, ranking number one in the provision of accounting and related services to the mid-tier, SME and high net worth markets by number of clients.
This position, emanating from the Company’s “owned” distribution strategy in the business and financial services sector, provides Investor Group with excellent scope to expand both its accounting and financial planning operations over coming years.
COMPLETION OF C.E. SMITH TOWNSVILLE ACQUISITION
The directors of the Company are also pleased to advise that further to the ASX announcement made on 23 September 2004, the purchase of the North Queensland based accounting firm C.E. Smith Townsville was completed on 31 January 2005. The business has merged with existing member firm WHK-TCM Partners to form WHK-TCM Smith, the largest public accounting firm operating in the North Queensland region.
This transaction and the FMS acquisition are consistent with Investor Group’s on-going growth strategy relating to the expansion of individual core member firms by selective acquisition of smaller businesses within respective geographic areas to achieve a competitive advantage through the scope and scale of operations. Pursuant to this strategy, Investor Group continues to selectively expand its distribution base in an earnings per share positive manner.
Kevin White
Managing Director U:\PATERSON, Bruce\ASX Releases\Asx FMS 020205.doc
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