Interest in the sale of Australian financial services businesses is expected to increase in the next three to five years, a number of industry executives have said.
Since the increase in merger and acquisition activity at the bigger end of the market in 2011, such as Commonwealth Bank of Australia’s purchase of Count Financial and IOOF’s acquisition of DKN, interest in sales is likely to continue in 2012 and pick up in the next three to five years.
“I think it’ll be the next three to five years we’ll see the largest transfer of business ownership that we’ve seen in the industry,” Kenyon Partners managing director Alan Kenyon told InvestorDaily.
“The trend we are seeing is continuing. [In] September, the level of buying enquiries increased dramatically. We were handling probably three or four enquiries a day from potential clients and they are looking for all sorts of things from books of business to significant acquisitions.”
Acquisitions are becoming an important part of companies’ strategy to regain their profitability after the global financial crisis.
Kenyon explained that uncertainly around the Future of Financial Advice reforms had also caused some financial planning business owners to sell their businesses.
Forte Asset Solutions director Stephen Prendeville said other drivers for the continued increase in sales were financial stress and people deferring their retirement plans.
“We’ve also seen an increase in selling of total businesses, but the vast majority of sellers have been in their 40s. What we have seen are people deferring their retirement plans,” Prendeville said.
“That’s been for two reasons. One, their superannuation has been substantially reduced over the past three years, and two, so have the recurring revenue of their businesses.”
In terms of the year ahead, he said it would potentially be difficult in light of economic market conditions.
“I think there is still uncertainty over future legislation. But at the same time, some have to sell due to financial stress, which was the primary motivator last year,” he said.
