A successful acquisition has the potential to transform your business, offering immediate scalability, improved efficiency, and the ability to delegate day-to-day operations. Moreover, it can result in instant enhancements in margins, purchasing power, and market share, propelling your business towards unprecedented success.
However, when venturing into the world of acquisitions, understanding the intricacies of the approval process is paramount. Before proceeding with an acquisition, thorough familiarisation with all relevant legal documentation outlining future payment rights is essential. Let’s delve into what you need to know:
Aggregator, Dealer Group, or Franchise Approval
In the acquisition landscape, securing approval from your aggregator, dealer group, or franchise is often a prerequisite. This step is vital as it grants you the legal right to take ownership of the acquisition target. However, it’s essential to note that approval procedures can vary significantly depending on the entity involved. Trailblazer Finance can guide you through this process.
Restricted Approval
Approval may come with certain constraints. For example, some aggregators restrict acquisitions to their existing members, while specific mortgage managers may impose prerequisites such as specific guarantees and qualifications. Similarly, franchises typically require acquirers to become franchisees to access acquisition opportunities.
Failing to obtain the necessary approvals poses a significant risk, potentially resulting in the nullification of the acquisition and the loss of deposits or payments made.
Poorly executed acquisitions can spell disaster. Inadequate preparation and due diligence can devalue both the acquired asset and your existing business. Compliance issues further exacerbate the risks, potentially causing irreparable damage.
At Trailblazer Finance, we specialise in guiding clients through the acquisition process, ensuring optimal outcomes every step of the way. From conducting due diligence to negotiating agreements and securing financing, we provide comprehensive solutions tailored to your unique needs. With our expertise by your side, you can navigate the complexities of acquisitions with confidence and achieve your business objectives. Trust Trailblazer Finance to be your partner in success.
Eager to gain in-depth insights into the crucial elements of a successful acquisition? Download our comprehensive eBook, “Acquisition Ready: The 10 Things Finance Professionals Must Cover,” crafted by our specialist funders.
AFG has announced a new outsourced trail book marketplace for brokers through an arrangement with specialist cashflow lender and Mergers & Acquisitions advisory firm, TrailBlazer Finance.
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Are you equipped to weather all seasons in 2021?
Congratulations – you survived the Covid-19 flash storm that engulfed 2020! But before the uncertainty and turbulence of 2020 dwindle into the recesses of our collective memory, stop to ask yourself what does the rest of 2021 hold for the mortgage and finance brokerage industry?
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The aggregation group has appointed a specialist lender, TrailBlazer Finance, to its asset finance panel, making more products available to its broker members.
Australian Finance Group (AFG) has welcomed trail book lender TrailBlazer Finance to its asset finance lender panel.
The addition will provide AFG brokers and their white-collar clients with access to the lender’s funding products and advice, which is specifically created for those with recurring revenue streams, such as brokers, financial planners, accountants, real estate managers and other cash flow businesses.
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We recently launched a new low repayment loan for mortgage brokers and financial planners. Designed to boost cashflow, the Balloon Booster is structured like a balloon loan and features lower monthly repayments and flexible end-of-term refinancing options, allowing the balloon to be paid out or refinanced into a two-year loan.
Importantly, the loan product allows brokers and planners to better manage cashflow and maximise working capital at a time when many small businesses are struggling with their short-term cashflow needs.
Jeff Zulman, Managing Director of TrailBlazer Finance commented, “We know from talking to our clients that right now many brokers and planners need a short-term cash boost to free up working capital as they navigate the evolving post-COVID-19 market.
The Balloon Booster is designed specifically for this purpose. It is a low repayment product, with repayments 50 per cent or lower than those of our standard loan product. This helps our SME clients manage cashflow when they need it most.”
The new loan product further strengthens the specialist lender’s offering to its broker and planning clients, with Mr Zulman adding, “TrailBlazer Finance is committed to delivering the best possible solutions for these white-collar professionals. We are proud to be able to provide a product which is tailored to the needs of our clients, and the industry more broadly at a time when others are tightening their credit criteria and raising rates.”
Understanding the drivers and what they mean for your brokerage
For the mortgage broking fraternity, like most industries, 2020 continues to present a litany of challenges that colour the future with a particular shade of uncertainty that appeals to only the most hardened opportunists.
If we get down to it, how are the smartest and most adaptable mortgage brokerages adjusting to the myriad challenges being presented? And where are the opportunities to turn these challenges into upside and create additional value in your business?
Navigating the valley of death
One thing we have learnt from businesses who have teetered on the precipice and successfully navigated through the valley of death and out the other side, is they often emerged far stronger – and done so by embracing change not just once, but again and again. Think Lego, Apple, Disney and Amazon. Each has used setbacks as catalysts for innovation, reinvention and disruption.
Mortgage brokers have also had to overcome their share of market shifting adversity over the last decade – be it threats to trail, regulation cuts, a Royal Commission and an ever-heavier compliance and educational burden. So those that are still standing have already had their resolve tested and proven their resilience. COVID-fuelled recession is just another round of fire, albeit an unprecedentedly heavy one.
Where is the value?
So far, we have not seen any notable negative impact on the value of trail book and mortgage brokerages from the current COVID-19 market maelstrom. But there has been a clear split in the pack with an increase in brokers leaving the industry. As a result, we’ve seen an uptick in stronger brokers approaching us for larger loans to fund book purchases as they sniff out opportunities.
We have identified seven drivers of trail book value and what you need to look at when buying a book or preparing your own business for sale at the optimal value:
1. Seasoning. This is the length of time individual loans have been on the book. The longer they’ve been in your book, the higher the value.
2. Underlying run off. This looks at how quickly the book is losing loans. Focus on embedding those relationships.
3. Arrears and clawbacks. Frequency with which clients slip into arrears or loans are clawed back. A potential challenge in the current market.
4. Growth in underlying loans. Growth in the number and value of those loans. Hold tight to the loans you do have.
5. Growth in trail. A growing trail book is a valuable asset, particularly in a time of uncertainty. Tap into gaps in the market.
6. Not all loans are equally valuable. A properly structured investment loan, for example, could be a more valuable asset than a residential loan. Write loans where you haven’t previously.
7. Underlying spread of lenders, borrowers and products. Focus on the mix and diversity. Concentration risk is a negative.
And a dollop of better, smarter, faster will not go astray
Innovation is not necessarily about scrum masters and setting the world on fire. It can be as simple as getting the basics right. If you look hard enough, there are quick wins out there both from a resilience and value-building perspective. Check out our five tips to help prepare your business for what comes after COVID-19.
Take two minutes to get a sense of your trail book value
Check out our free trail book valuation calculator to get a sense of the value range for your trail book today.
You can also download our valuations flyer for further information.
In an excerpt from his recent interview with Stuart Donaldson at the Mortgage Business Commercial Masterclass, M&A specialist and TrailBlazer Finance Managing Director, Jeff Zulman, explains why brokers who can hold on through the current cycle will emerge stronger.
Adapting Geoffrey’s Moore’s Crossing the Chasm, which taught the start-up community how to leap the chasm between early adopters and the early majority, Jeff applies this model to the mortgage broking industry in a COVID-19 landscape.
He surmises that the Australian mortgage broking industry has experienced its halcyon stage, growing its market share from 18% in 2002 to a high of 60% in 2019 to hover around 55% in 2020 (Source: MFAA). Along the way it has suffered a litany of setbacks – the GFC, increased regulation and then the threat of abolition of trail – and finally finds itself in the COVID-19 chasm, the “valley of death”.
For those brokerages with the strength and resilience to survive this current phase – those that can demonstrate their ability to transcend cycles, build value and sustainability and come out the other side – steady, mature growth awaits, and, with it, tremendous opportunities from an M&A perspective.
Watch the short interview: M&A expert Jeff Zulman tells mortgage brokers to hold on
Crossing the COVID-19 chasm
If you are looking for advice around acquiring or selling trail books or need a cash flow boost, contact us today for a confidential conversation.
It goes without saying that large and small businesses alike are facing unprecedented challenges in the current environment. Brokers are certainly well-versed in how to hand tough times. What we know from those times is that where there are challenges there are invariably opportunities. Sometimes it’s simply a question of finding a partner to help you realise those opportunities when they present themselves.
In 2014, Chris Booth caught wind of an unmissable opportunity. At the time, he and his other business partners were running a successful full-service financial advisory business, Announcer Mortgages (now Infocus).
When they were offered the chance to buy an undervalued client book, an acquisition that would allow them to increase their footprint and further diversify their business, they decided to try to pull together the funds to make it happen. Knowing the book would eventually appreciate, they hoped to engage, convert and grow as many clients as possible before selling the book at a higher multiple.
Chris Booth, Head of Lending, Infocus
Finding funding
Having pooled their income streams, Chris and his partners shopped around for lenders to fund the purchase. Unhappy with the options available to them, Chris spoke to the Executive Director at his aggregator who facilitated an introduction to TrailBlazer Finance’s Managing Director, Jeff Zulman. Using a specialist trail book loan from TrailBlazer, Chris and his partners were able to borrow against Announcer’s mortgage trail book, rather than risk personal assets, in order to free up the capital to buy the book.
“In the end, we proceeded with the loan purely because of Jeff and the team. They made themselves physically available to us throughout the process and it gave us great confidence, both personally and professionally, that we were making the right decision with the right lender.”
Making growth happen
At the time of purchase, Chris was working with another part-time broker. While the business didn’t convert quite as many clients as they’d bullishly projected, they did manage to sign on around 500 fee-paying full-service clients from that book alone. By the time he and his partners decided to sell the business three years later, Announcer had increased in size to three full-time brokers, their client roster had more than doubled and the business had grown by almost 130 per cent in terms of the underlying trail. They subsequently sold the business to Infocus in 2017, repaying any remaining debt and banking a tidy sum.
Words of advice for brokers looking to grow
While Chris is the first to admit the industry is in a very different place in 2020, post-Royal Commission and mid-COVID pandemic, he would do it all over again. As a small business success story, does he have any advice for other brokers seeking to grow their business through acquisition?
“Using borrowed money is a good way to acquire clients and build your business quite quickly. You have a warm opportunity to call which makes it so much easier than building a book from scratch. Would I buy a mortgage book right now? Absolutely yes, the multiples are good, even though the market has some unknowns after the Royal Commission.
Acquisitions done properly absolutely work. However, be ready for it to take far longer than you’d expect to work a client book effectively. Ultimately, you still have to win the hearts and minds of the clients. One of the biggest learnings from the financial planning industry is that they didn’t try to win the clients. You have to call and build relationships, be proactive and be positive. Building those relationships is everything.”
Let us help
If you would like to find out about how we can help your business grow with our unique loan products for brokers and other white-collar professionals, please contact us on 1300 139 003 or at info@trailblazerfinance.com.au
