How to buy or sell a business successfully

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How to buy or sell a business successfully
Steve Prendeville Alan Kenyon
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Our Background

• Alan Kenyon and Steve Prendeville
• Each have 25 plus years experience in Financial
  Services industry
• Owned, managed and sold their own Financial
  Planning businesses
• Established Kenyon Prendeville 2003
• First to market
• 120 plus transactions in all states, many
  regional areas.

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Market Pricing Summary

• 12 month average FY 2005 3.00
• 12 month average FY 2006 3.31
• 12 month average FY 2007 3.45
• 12 month average FY 2008 3.55
• 12 month average FY 2009 3.26
• Victoria Metro 3.65
• Regional 3.30
• New South Wales Metro 3.45
• Regional 3.09
• YTD National Average 3.46
• (excludes internal dealer and distressed asset
  transactions)

EBIT Range 5-8
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Financial Year 08/09 Commentary

• November - February transactions practically
  stopped.
• MA activity rebounded in March (along with
  markets).
• Excellent result for 2 sales March/April 3.79
  Recurring Revenue and one at 7 times EBIT.
• Risk business 3.5 plus 1 x 1 years new business
  Revenue.
• Some transactions included large future upside
  payments.
• Post 30 June 2009 Increase in Market Activity
  (market improvement, investor confidence and
  regulation fear)

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Financial Year 08/09 Commentary

• KP transacted 3 receiver sales and 4 bank
  initiated sales, the highest profile being Storm
  Financial.
• Emergence of more specialist buyers and sector
  specific.
• Receiver appointed transaction Diminished
  value less than market
• Bank co operation - equal to or enhanced value.

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Current Position Year to Date

• Significant increase in buyer demand.
• Significant increase in sellers.
• Reason for increased sale deferment 08/09,
  stabilised revenue and future legislative risk.
• Focus on FUM segmentation
• (dont want exposure to Timbercorp, Great
  Southern.)

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Current Position Year to Date

• Risk businesses highly sought after.
• Basis of current Purchase Prices last 3
  months Rec Rev annualised
• Forecast Recurring Revenues
• Gross Business Earnings (focus
  on covenants)
• Increased Focus on profit post acquisition.
• Misnomer Re banks not lending
• More detailed and timely information required.

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Future

• Question mark over Corporate Super, volume
  overrides/rebates.
• Challenges Legislation, interest rates,
  business pricing models.
• Opportunities More focus on business models
  and profitability.
• Increased marketing activities will bring
  rewards.
• Unknown factor - if/when will supply exceed
  demand?
• Currently no change still a sellers market.

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Key Learning's

• Timing of the market is difficult can have
  contractual protection
• Operate business at 35 EBIT to gross revenue
• Run business as if you are going to sell next
  year
• Explore fee for service that is not FUM
  linked
• Over communicate to client base in these
  challenging times. Many businesses reporting
  client attraction because of communication
  comparison

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QA with past buyers and sellers

• Vince Vozzo Previous part owner of Retirement
  Victoria and owner of 3 RetireInvest
  franchises
• Spiro Paule Managing Director of Financial
  Index Australia Pty Ltd
• Richard Dixon Former Director of Rubicon
  Financial Services
• Ian Murdoch Former owner of Investstone
• Malcolm Arnold National Manager of National
  Australia Bank