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Moneygate’s David Hickey on acquisition plans and a possible float

Moneygate chairman David Hickey says an Aim listing will become a “serious option” in 2016.

F&TRC

Newly appointed Moneygate chairman David Hickey says the national advice firm could look to float in three years time as it continues an aggressive acquisition strategy.

Hickey left Lighthouse in August last year following a failed attempt to de-list the company from Aim.

The proposal, which was voted on by shareholders in July 2012, would have required 75 per cent backing to succeed. In the event 53 per cent voted against leaving the stock exchange and Hickey quit a month later.

Hickey says he is not fundamentally against adviser firms being listed on the stockmarket and suggests it will become a “serious option” for Moneygate in the next three years.

He says: “Moneygate is perfectly well funded at the moment and I have very strong views about when stockmarkets work well for companies and when they don’t.

“When the business is worth £100m [it is currently worth £15m] I have no doubt we will look seriously at the merits of a quote, but until it is heading towards £100m there is a risk we will fall into the same liquidity trap that Lighthouse ended up in with people just not valuing it properly at all.

“In that situation, in my view, it is pointless being on the market. I do not think an early float is on the cards but think it will be a serious option in three years time.”

Hickey remains adamant that Lighthouse shareholders would have been better off had he succeeded in de-listing the company.

He says: “My view, and the view of the board, was that Lighthouse was worth between 10p and 20p per share, but the share price was between 3p and 4p per share, as it remains today.

“That means if somebody came along with a bid of, say, 6p a share they could potentially buy the business at a gross undervaluation. That is far from being in the Lighthouse shareholders’ best interests.”

Hickey says a failure to properly communicate this message to Lighthouse shareholders was at the core of the failed de-listing attempt.

“What I think we failed to do at Lighthouse was convince shareholders of that message. 

“Some of them certainly did not want to be convinced and saw it as an opportunity to show off and make a bit of noise in the press. Frankly that could cost them an awful lot of money.”

Moneygate’s desire to acquire adviser firms – it has bought 20 businesses in the last three years –  has led some to speculate it could launch an audacious bid for Lighthouse.

However, Hickey says acquisitions of this size are not on the agenda for the moment.

He says: “Our IFA business has a very good acquisition model and we are interested in firms turning over £1m-plus although at this stage we are not in the market for firms turning over more than £10m.

“I do not envisage any large acquisitions in the next two years but we expect to make a large number of smaller acquisitions.

“I would expect us to acquire 5 to 10 new businesses between now and Christmas, and the same again next year.”

Hickey says the economic impact of the RDR will drive smaller IFA businesses towards larger firms like Moneygate in order to benefit from greater economies of scale.

He argues the firm’s position in the market is further strengthened by the cautious stance it has taken on unregulated collective investment schemes.

He says: “Moneygate was both lucky and clever. It was lucky because it only really got going as a business in 2009, so it avoided the whole post-Lehman Brothers debacle.

“It was clever because it went about banning things like Arch cru and Ucis from the very beginning, so it does not have the legacy problems you see elsewhere in the industry.”

Hickey says Moneygate’s advice business, recently rebranded as Fairstone Financial Management, will remain independent post-RDR, although he does not rule out launching a restricted service to sit alongside it.

He says: “I would be very surprised if Moneygate did not retain a strong independent offering but I do not think anybody would rule out having a restricted arm at some stage.

“But we are not setting out to be a narrow salesforce – that model does not attract us.”

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