Fairstone bolsters DBO acquisition model

Wealth advisory firm Fairstone Financial Management has announced that it has updated its downstream buyout (DBO) acquisition model, giving the independent financial advisories (IFAs) that it acquires the potential to double their business’ market value and providing capital for them to make acquisitions of their own.

Fairstone’s DBO model sees the company’s target firms integrated into the business over time. This enables them to increase their value and attain growth prior to, as well as after, the acquisition. The model has now been expanded to create a strategy that, Fairstone says, can generate overall value equivalent to 12- to 18-times a company’s current profits.

The enhancement of the DBO model aims to create opportunities to help new and existing acquisitions unlock greater long-term value. This includes funding and support prior to sale to help the company grow and increase its profits, as well as agreed income and bonus levels being maintained for up to 10 years post-sale.

The expansion enables shareholders to take a higher proportion of the group’s overall growth as well as access to Fairstone capital to enable them to acquire regional firms. The enhanced DBO model also comes with a new profit sharing scheme, enabling shareholders and non-shareholders to receive cash rewards every five years, in addition to salary, bonuses and capital payments.

Fairstone CEO Lee Hartley (pictured above) 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.”

“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.”

With 50 acquisitions made over recent years, Fairstone has emerged as one of the key consolidators within the UK's thriving M&A market for financial advisory firms. Dealmaking activity in this sector shows no signs of slowing down either, with a recent survey revealing that 60 per cent of advice firm owners are planning a sale within then next three years.


Find out more about Fairstone's DBO acquisition model.

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