Tavistock Investments is on the brink of acquiring Standard Financial Group, the parent company of adviser network Financial Ltd.
The investment firm has entered a “conditional contract” to buy Financial and has raised £2.7m to provide “additional regulatory and working capital for the acquisition”.
The adviser network was banned from recruiting new ARs and individual advisers for four and a half months in July last year after the FCA identified “systemic weaknesses” in the network’s systems and controls.
Tavistock will initially pay £500,000 for the business, with current Financial owner Charlie Palmer buying IFA Compliance Ltd, a subsidiary of Financial, for £52,000. The remaining £448,000 will be used to “repay outstanding inter-company loans owed by IFAC”. Palmer will leave Financial once the deal has completed.
Tavistock will then provide Financial with a further £500,000 of extra working capital and undertake to provide an additional £500,000 of funding if required.
Tavisock will also pay a deferred consideration to Financial equal to £2,000 for each adviser who remains with the group from the date of completion until 31 March 2016. The maximum possible value of this deferred consideration would be £602,000.
Speaking to Money Marketing, Tavistock chief executive Brian Raven says the acquisition is a “done deal” and could receive regulatory approval by the end of this week.
Asked about Financial Ltd’s previous regulatory failures, Raven says: “I have concerns every time I do a deal and when you learn a company has had difficulties with the regulator, clearly you are cautious.
“We have engaged in extensive due diligence and this business has been led by a new senior management team since 2013 and that team has done an extremely good job in navigating some turbulent waters.
“It has very robust and reliable systems and processes and we wouldn’t be proceeding if we weren’t confident about that.
“The business has suffered as a result of those difficulties and, in my view, Charlie Palmer has done the right thing by the business here and I wish him all the best.”
Tavistock acquired IFA firm County Life & Pensions and investment manager Blacksquare last May.
As part of the deal County Life & Pensions, which owns the Sterling McCall wealth management network, was valued at £7.3m.
In September, Novia took a £250,000 stake in Tavistock and provided a loan facility of up to £750,000.