2019 has been a very busy year for Broadstone, with four acquisitions so far. Will we see as many deals next year?
It is a bit like London buses. We didn’t expect to do three acquisitions in three months this year. We have a strong pipeline of potential acquisitions, but when it comes to deals you can never fully predict what will happen.
What sorts of firms are you looking to acquire?
Our business covers three areas – traditional consulting and actuarial services in the DB space, trustee services and the newer area of employee benefits, covering DC pensions, health and risk and the broader wellbeing agenda.
We are looking to bring in likeminded people in firms with a good culture. Buying other people’s problems is a bad idea.
This means finding owner-managed businesses where the right conditions exist – which means firms that can benefit from the support and infrastructure that comes with being part of a larger firm.
What do the firms that join you get out of it?
We think we have been a good acquirer. We provide things they can’t access themselves – infrastructure and funding, as well as access to the other services we can offer their clients, while leaving them autonomy as to how they manage things. Their clients get access to full range of Broadstone solutions and services, while the individuals within firms become part of our collegiate organisations. While not legally a partnership we retain some elements of the partnership philosophy – we ran a flat structure, and try not to create hierarchies. And we have retained everyone who has joined, while growing the capability overall.
Private equity firms seem to like adviser consolidation businesses. What sort of multiples are being paid to buy advisory firms?
Payment is in single digit multiples of EBITA (earnings before interest, taxes and amortisation). Within that there is no universal approach. You look at the specific opportunity set for each firm. Often there is a third party marketing the firm, and in the last three or four deals we have done we have been up against other potential acquirers.
What new areas do you plan to explore?
We are very much committed to organic growth across the board. But we see the employee benefits side of the business as a particular area of growth. There are lots of SME employers out there who are not engaging with benefits. We know they are time-pressed so benefits have to be made easy for them. Making it easy to serve this segment is a key objective for us.