(Pictured: Ian Knox)
Shares in HUB24 jumped on the news as the listed financial systems company announced last Thursday its takeover of advisor licensee Paragem for cash and shares spread over the next three years. The deal, and response to it, is a fillip for the whole IFA market.
Under the deal, Paragem founders, Ian Knox, the managing director, and Charlie Haynes, who heads up operations, split the total, currently worth $8 million in cash and shares. The advisors get up to $6 million worth of shares as valued prior to the sale. The advisors currently represent 20 practices with funds under advice totaling $2.5 billion.
The share price jumped from $1.05 to $1.20 immediately after the announcement, which is unusual for an acquirer company, and then peaked at $1.27 the following day for a 21 per cent gain. One of the advisors in the deal said that, given the funds had not even been transferred and a lot more funds would probably follow over the next three years, the final HUB24 shares allocation could be worth more than $12 million to Paragem shareholders.
Knox said Paragem would continue to look for new advisors to join the group in coming years. He predicted that the technology would take a lot of business away from the big wrap providers.
Since its inception in 2004, Paragem has championed the notion of independence and publicly railed against many standard industry practices, such as paid shelf space on platforms and opaque fees. It launched its dealer services arm in 2006 and its licence business in 2006.
The licensing part was opened to the broader industry in 2009 and the labour-intensive dealer services arm was sold in 2011 to concentrate on licensing and growing FUA.
Knox said the Paragem client base was well suited to HUB24’s expertise in separately managed accounts. “We wanted to embrace an independent technology-based product provider at the forefront of SMAs and managed accounts,” he said.