Fairstone launches major enhancement to its unique acquisition model

Fairstone, one of the UK’s fastest growing wealth advisory firms, has further developed its hugely successful acquisition model to create the potential for firms to effectively double the market value of their business.

Whilst the core commercials of the DBO model remain unchanged, Fairstone is providing business owners with a series of upsides which allows them to participate in the ongoing success of the group for the first time. The enhancements to the Downstream Buy Out (DBO) acquisition model, which are available to all new and existing partners within the group, unlock five ongoing opportunities for IFA firm principals to secure greater long-term value.

By enabling business owners to benefit from multiple layers of value creation, the extended proposition can deliver overall value equivalent to between 12 and 18 times current profits. Through these new additions to the offering, shareholders can take a greater proportion of the group’s organic growth as well as using Fairstone’s capital to buy regional firms themselves, thereby crystallising far higher value.

Profit share scheme

In addition, Fairstone has launched a new profit share scheme which provides both shareholders and non-shareholders the ability to receive significant cash awards every five years which are in addition to capital payments, salary and bonuses.

The five layered enhanced proposition includes:

Funding and support to drive growth and increase profits prior to sale to deliver an optimum acquisition value
Maintaining agreed income and bonus levels for up to 10 years beyond the point of sale, thereby preserving the banked capital
Sharing in the continued growth during the earn-out with increasing profits factored into a recalculated purchase price, creating additional capital payments
Access to the capital required to support the purchase of firms in their local market and form an acquiring hub within the group, creating long-term and uncapped value
An ongoing profit share programme which gives the potential to pay out between two to three times annual salary over a rolling five-year cycle

Lee Hartley statement

Fairstone CEO Lee Hartley said: “As a business we really believe that our offering is a partnership more than just a purchase. Allowing shareholders to maximise their long-term value is a central aspect of our DBO acquisition model. This is borne out in the firms we acquire who are exceeding their target sale values and consistently receiving consideration far above their original transaction target.

“Extending our proposition further, by supplying our partners with the capital to acquire local firms themselves, and by launching what is a very significant profit share initiative, makes us truly unique. We have the proven ability to support long-term organic growth at a multitude of levels and share the value that creates.

“Our enhanced five-layer proposition is the next stage in our strategy, reinforcing our commitment to working in partnership with firms that join us, creating more value together. If you’ve spent 20 years building a great advisory business, why should the value you create simply end on the day you decide to sell?”

This market-leading proposition for the sector follows Fairstone recently securing its 50^th acquisition over 10 years of M&A activity and comes as the firm gears up to accelerate growth.

Hartley added: “As an organisation we are really investing in our partner firms and our established model allows the right type of business to crystallise value far beyond typical market multiples.

“Our proposition and the figures that underpin it really set us apart from our peers. We describe ourselves as an investor in sustainable growth, not simply a consolidator, and creating new layers of value reinforces our position as the stand-out partner for quality businesses.”