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Consolidator gears up for more acquisitions as loss reduces

economical investmentConsolidator Succession reduced its loss in 2017 and says it is in discussions with around 20 firms over potential acquisitions.

Succession Holdings, which is the parent company of the wealth management and platform businesses, increased turnover at its advice business by 71 per cent last year, growing from £26.4m in 2016 to £45.3m in 2017.

Total adviser numbers at Succession also increased from 112 to 169. Operating profit for the group was also up £1.1m to £3.4m.

However, overall the business recorded a loss of £329,000, which was an improvement on the previous year when a £2m loss was reported.

Annual accounts for both Succession Holdings and subsidiary Succession Group say “the achievement of its strategy of continued growth through acquisition” is a key risk, but the establishment of new due diligence, acquisition and integration processes are combating the issue.

In its accounts, Succession Group says risks relating to the identification and completion of suitable acquisitions, financial and operational risks relating to post-acquisition performance of acquired businesses, and obligations arising from pre-acquisition liabilities are also major concerns.

Money Marketing revealed Succession Group is changing its model for buying advice firms, reporting in June that the consolidator has its eyes on larger firms this year.

Speaking to Money Marketing today, Succession Group proposition and marketing director Mark Stokes says the group is currently in conversation with around 20 firms ranging from £50m in assets to £2bn.

According to its annual report, the combined consideration for its acquisitions last year was £23.5m, including estimates of contingent consideration dependent on post-acquisition profitability. The combined full-year turnover of these acquisitions totaled just £13.7m.

Administrative expenses for Succession Group were up from £7.4m in 2016 to £8m in 2017.

The report says these costs are those incurred by acquired businesses that are directly operated by the company and an increase in group resource requirements to manage the current and future planned expansion of the group.

Funds are expected to become available for other purposes following its cancellation of all advertising, however.

The report says: “A decision has been taken to cease this activity and therefore no further income will be received beyond 2017.”

Succession to compensate after battle over advice responsibility

The group also continues to move to a regional management structure, expanding from nine to 12 regional hub officers last year.

Although Succession Holdings group companies had to stump up funds to cover Succession Group’s acquisitions, the report says the overall companies’ financial performance was “in line with the company’s business plan” for 2017.

Succession Group had acquired 10 firms by 30 September last year according to its reports. Four firms with a total £225m in funds under management were bought last December, while Inverness-based MacKenzie Investments and Cheltenham IFA Warwick Butchart Associates were acquired last month.

Stokes says: “This year we have made some adjustments to the way our advisory services work and we are now focusing on our platforms and our investments. To get us into a situation where that can happen we took a bit of a breather on the acquisition front but we will have more news on acquisitions throughout 2018.”

Succession Holdings is currently managing £7.75bn in assets under management with £3.6bn on its own platform.

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