findex-kkr in bidding war with anchorage

Very, very good news holders. Wouldn't surprise me if the trading halt was delayed while these guys are slugging it out, but I suspect we're going to be very happy with the outcome once this is resolved.

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Financial Index Wealth Accountants is in a bidding war with private equity firm Anchorage Capital Partners to gain control of the nation’s fifth largest accounting firm based on revenue, Crowe Horwath Australasia.

It emerged Monday after Crowe entered a trading halt that Findex, which is part-owned by KKR Asset Management, the local arm of United States private equity firm Kohlberg Kravis Roberts, had a multi-million dollar takeover offer.

Anchorage, best known for ramping a $94 million Dick Smith Holdings investment into a $520 million listing within 14 months last year, made a non-binding and “highly conditional” privatisation proposal to Crowe in March.

Findex has just bedded down its $130 million acquisition of Centric Wealth. The transaction, completed in March, solidified Findex’s position as the biggest non-bank affiliated financial planning group in the country with $7.6 billion in funds under management.

Shopaholic Findex chief executive Spiro Paule has turned the focus of his aggressive growth by acquisition strategy to the related field of accounting.

A KKR spokesperson declined to comment when contacted by The Australian Financial Review, as did Anchorage boss Phil Cave.

Crowe chief executive Chris Price was not returning calls Tuesday morning.

Crowe told the market the trading halt will last until Wednesday.

Financial services accounts for roughly a quarter of Crowe’s $406 million annual group revenue. If this fetches a similar multiple to that IOOF was willing to pay for SFG Australia (18.5 times earnings) that portion of the business alone would be worth a pretty penny.

Crowe’s market capitalisation has been slowly creeping up since Anchorage expressed interest in the group. It sits at about $115 million currently.

However, there are mixed views about Crowe’s residual value after four profit downgrades in a year - the most recent a fortnight ago.

Normalised profits are expected to be between $16 million and $17 million for the 12 months to June 30, 2014, which is in “the lower end of analyst expectations of $17.1 million”.

Some feel the exodus of senior staff in Sydney and Melbourne has irreversibly destroyed the group’s income stream.

Others familiar with the group say Melbourne and Sydney have never been very profitable segments and could be cut loose with very little impact on profit.

They say with 80 per cent of income in the accounting arm generated by Crowe’s regional businesses it still has “a load of value there”.

Alceon Group certainly thinks so. The boutique investment and advisory firm has acquired close to 20 per cent of the company since February, making it the largest single shareholder.