Downstream Buy OutA detailed look at our unique DBO proposition

It enables business principals the opportunity to optimise the capital value of their firm while also securing attractive on-going earnings at no detriment to their clients, advisers or staff.

For both parties, the model reduces integration risk and minimises disruption after the sale, creating a partnership which is fully aligned with FCA guidelines.

Operating within a Corporate Chartered framework, Fairstone’s DBO model turns the acquisition process on its head, by enabling firms to fully integrate and align with the business, grow and then sell to achieve their aspirational sale value.

Fairstone provide the framework for firm principals to sell and then stay with the business and by joining Fairstone you become part of one of the UK’s fastest growing financial services organisations whilst retaining ownership of client relationships and the direction of your own firm.

The value of an IFA or wealth management firm under the DBO model is derived from an attractive valuation formula based on future profitability at the end of a minimum two-year integration phase – uniquely this also allows business owners to control the sale window to maximise capital value.

With an abundance of additional support services, centralised resource and new business opportunities to utilise, you can focus on growing and streamlining your business in preparation for future sale to a secure, stable and proven acquirer.

Fairstone’s Downstream Buy Out (DBO) is a unique acquisition model aimed at the owners of successful IFA practices.

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The Fairstone Downstream Buy Out (DBO) model turns the traditional acquisition process on its head.

INTEGRATION GROWTH ACQUISITION

. Operate within a Corporate Chartered framework

. Retain ownership of clients and revenue

. PI and Regulatory costs absorbed at group level

. Continue to provide independent financial advice

. Utilise industry leading technology

. Operate within sensible and robust compliance standards

. File checking, case audits and pre-approval reviews handled by Fairstone

. Retain company name and branding

. High quality client facing marketing material

. Adviser training, supervision and on-going CPD support

. Centralised fee collection and reconciliation

. Access to enhanced fees via leading mortgage clubs and protection panels

. Dedicated integration team supporting client novation

. Investment committee providing market wide research and on-going fund due diligence

. All incoming post scanned and allocated

. Bespoke investment management solutions

. Professional paraplanning service available on a ‘pay as you go’ basis

. Access to growth funding

. New opportunities generated by our customer acquisition service

. Reactivation of dormant clients

. Recruitment assistance and succession planning

. Generate additional revenues by referring non-core business to internal specialists

. Adviser and staff development via the Fairstone Academy

. White labelled conveyancing

. Dedicated estate planning channel

. Post sale case management and administration

. Links with tax planning, accountancy and legal firms

. Business development consultancy and growth support

. Ability to further increase sale value post acquisition

. Net free cash can be extracted as part of the sale

. Employee contracts adhere to TUPE rules

. All shareholder contracts remain on consistent terms post sale

. No requirement to move client assets or increase client charges

. Transparent profit-based valuation formula

. Pre-agreed acquisition window - which you can control to maximise capital value

. Full cash pay-out typically within 24-36 months

. Further increase sale value after the point of purchase (average 15% further upside)

. Continue to work with clients and earn attractive levels of income

. Take on new heightened roles with Fairstone

. Typical 36 months

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The Downstream Buy Out process

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PAY OUT

PAY OUT

2, 3 or 4 year integration phase as partner firm

Structured earn-out period, typically between 3 to 4 years

Ability for sellers to continue to increase total consideration

Partner firms:

9 Build customer base

9 Focus on growing profits

9 Access catalyst services

9 Maximise sale value

9 Can increase revenues

9 Principals continue to run business

INTEGRATION GROWTH ACQUISITION

Fairstone provide Business Quality Platform

PAY OUT

PAY OUT

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How our valuations work...

Our valuation formula is based on 9x sustainable profits at the point of acquisition

Turnover £1,000,000 £2,000,000 £3,000,000

Adviser payments (£333,333) (£666,667) (£1,000,000)

Gross Profit £666,667 £1,333,333 £2,000,000

Administrative expenses (£200,000) (£350,000) (£500,000)

Profit before Tax £466,667 £983,333 £1,500,000

Taxation (£88,667) (£186,833) (£285,000)

Profit after taxation £378,000 £796,500 £1,215,000

Valuation £3,100,000 £6,500,000 £9,850,000

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Interested in joining us?

If you don’t meet this profile, we would be happy to discuss how we could help your business evolve into a new form.

We expect business owners to play a critical part in the delivery of a successful integration period, acting as an ‘ambassador for change’ within their organisation.

We need you to engage with Fairstone on all levels and embrace the client and adviser proposition in order to align your firm with our culture.

By working together in this way, we will deliver a strong, sustainable business.

The firms that successfully join us are strong, high-quality businesses and have some common traits:

When it comes to partnering with IFA practices, we do have a series of minimum requirements that we look for.

Recurring income of c75%

Annual turnover of £0.5m+, with three fee earners as a minimum

Chartered or committed to achieve

Able to demonstrate annual growth (c6% pa)

Less than 50% of assets in bespoke portfolios, with no default DFM position

Average client portfolio size above £250k

Average client age of 60 or less, with demonstrable succession plans

No default investment solution

To discuss your options call 0845 605 0680 or email joinus@fairstone.co.uk

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Head Office: 1 The Bulrushes, Woodstock Way, Boldon Business Park, Boldon, Tyne and Wear NE35 9PF.

London Office: 4th Floor, 25 Copthall Avenue, London EC2R 7BP.

T: 0845 6050 680 | F: 0845 6050 681 | W: fairstone.co.uk | E: joinus@fairstone.co.uk | Twitter: @FairstoneGroup