Fairstone’s Downstream Buy Out (DBO) is a market leading growth model. Through the DBO we partner with the owners of ambitious wealth management practices, investing in their growth and enabling them to maximise their long-term value.

Our unique proposition allows shareholders to benefit from growth before and after the transfer of ownership and ensures they optimise their business performance before crystallising a structured sale and capturing an enhanced valuation.

We believe in a partnership not a purchase and we are confident that we can create more value together than apart. Fairstone’s DBO enables shareholders to unlock five layers of enhanced value, not just a single sale event. We invest in your growth and protect your people, creating the growth platform for you to double the value of your business. Taking you beyond market multiples while never treating your clients like a commodity.

We believe that integration is the key to any successful partnership as it allows both parties to invest, support and grow together. Our experience has proved that integrating first and managing it from the outset leads to much less disruption at the future point of sale.

For both parties, the model reduces integration risk and minimises disruption, creating a partnership which is fully aligned with FCA guidelines.  By partnering with Fairstone you join a company which incorporates one of the UK’s largest Chartered financial planning firms whilst retaining ownership of client relationships and the direction of your own firm.

Fairstone acts as a growth partner, and provides the centralised resource, technology, capital and new customers to support sustainable growth and enable forward thinking firms to achieve their maximum potential.

With an abundance of additional support services, centralised resource and new business opportunities to utilise, you can focus on growing and streamlining your business in preparation for future sale to a secure, stable and proven acquirer.

Integration

Growth

Acquisition

Enhancements

We believe that integration is the key to any successful transaction and dealing with the merge at the outset leads to a much smoother ultimate transaction.

Integration that is handled over an extended period allows both parties to get to know one another and achieve a gradual alignment of values and culture while continuing to grow the business. It also allows a seamless transfer for clients and staff at the acquisition stage.

At Fairstone, we understand that clients are your main priority and we will preserve your legacy and valued client relationships.

We guarantee that:

  • We never increase client fees
  • We never reduce client choice
  • We remain independent which means no shoe-horning of products, funds or platforms

Fairstone provide a robust and comprehensive compliance network and as the regulated entity, we take on the responsibility for reporting to the FCA as well as absorbing PI and regulatory costs at group level, allowing you to focus on what matters most, your clients.

Firms in the integration phase also have immediate access to Fairstone’s range of proven growth support services that drive an increase in business performance. Our investment committee will also provide you with market-wide research and on-going fund due diligence.

People are at the heart of any relationship and throughout this period, Fairstone will continue to invest in you and your staff, providing valuable training and development to enhance skills and qualifications through the Fairstone Academy, supervision and on-going CPD support.

Growth is a key aspect of the integration period and at Fairstone, we work hard to ensure our proposition gives firms the framework they need to significantly grow their business, without compromising on client service or independence.

Value creation is based on the stability and growth of a business and by supporting partner firms to grow during the integration phase, the benefits of this approach can be seen in a commercial sense.

Across the entire portfolio of acquired businesses, we are currently seeing 116% out performance figures – with partner firms delivering more revenue, profits and growth than either their own forecasts or those upon which the buy-out agreements are made.

As part of our commitment to helping our partner firms grow, we offer a range of growth support tools which include:

  • Growth funding
  • Customer acquisition
  • Centralised paraplanning
  • Building/acquiring client banks
  • Recruitment
  • Professional portfolio management on a discretionary basis
  • Marketing support

We believe in a partnership not a purchase and by offering a journey rather than a transaction each of the firms we partner with have a high degree of flexibility over the timescales of the ultimate sale.

The length of your integration period is firmly in your control and will be determined by how much you want to optimise your business growth and sale value.

As part of our enhanced value offering there is the ability to further increase sale proceeds after the point of acquisition by continuing to enhance business performance. Shareholders have the option to lengthen their cash pay-out period to benefit from the continued increase in profits.

Fairstone believe that one of the most valuable assets when looking to grow or acquire a people-based business is the ‘human capital’. This involves building a business model around people – from clients and the service that they receive through to staff and advisers, who should be motivated to deliver their services without compromise.

Our DBO model enables you to retain the human capital by ensuring the people involved in an acquired business remain involved post-sale in a significant capacity.

As a result of this approach, we have a 100% role retention, 94% adviser retention and 100% principal retention across all of the firms we have acquired to date.

Our five-layer proposition takes you beyond market multiples to ensure that you continue to share the upside long after your point of acquisition.

As part of our enhanced value proposition, we offer an uncapped profit share aimed at supporting advisers to organically grow their client base and revenues.

Repeating on a five year cycle the profit share offers advisers the opportunity to earn up to 3x their annual salary at the upper boundary.

All selling shareholders are also encouraged to take on a more involved M&A role within the business once their acquisition is complete, opening up a further opportunity to create significant value and securing their long-term future with Fairstone.

Utilising Fairstone’s capital, alongside their first-hand experience of the proposition and local market knowledge, they continue to grow their hubs, identifying like-minded firms to bolt on to their businesses via our Satellite DBO model, mentoring them throughout the process.

Download a copy of our brochure to find out about our unique Downstream Buy Out proposition

Download Guide

Valuation examples

Our valuation formula is based on 9x sustainable profits and 7.5% growth at the point of acquisition.

 

Revenue (£000) £1,000 £2,500 £5,000
Normalised profit after tax (“NPAT”) 300 750 1,500
Initial Capital @ 9.9% 267 668 1,337
Acquisition Capital @ 90.1% 2,811 7,028 14,056
Primary Capital 3,079 7,696 15,393
Secondary Capital 444 1,110 2,220
Total Capital 3,523 8,806 17,613

 

Payment 1,723 2,692 2,153
HORIZON Profit Share 3,446 5,384 4,307
Acquisition Value Share 1,163 1,163 1,163
Total Additional Value 6,331 9,238 7,623

 

Total Enhanced Value 9,854 18,045 25,236

Across the entire portfolio of acquired businesses, we currently average 16% out performance figures – with partner firms delivering more revenue, profits and growth than either their own forecasts or those upon which the buy-out agreements are made.

Interested in joining us?

When it comes to partnering with IFA practices, we have a series of minimum requirements that we look for.

The firms that successfully join us are strong, high-quality businesses and have some common traits:

Average client portfolio size above £250k
Annual gross turnover of between £1m and £5m with at least three fee earners
Recurring income of c75%
Consistent annual growth above 5%
Chartered or committed to achieve within 10 years
Less than 50% of assets in bespoke portfolios, with no default DFM position
Average client age of 60 or less, with a good level of new client information
A healthy legacy, with no exposure to high risk areas

If you don’t meet this profile, we would be happy to discuss how we could help your business evolve into a new form.

We expect business owners to play a critical part in the delivery of a successful integration period, acting as an ‘ambassador for change’ within their organisation and aligning their firm with our culture.

By working together in this way, we will deliver a strong, sustainable business.