Financial services firm Snowball Group has signed a licensing deal to acquire the revenue of three Sydney-based financial planning groups.
Under the arrangement, the three practices would operate with a Western Pacific licence, Snowball managing director Tony McDonald said. Western Pacific, along with Outlook Financial Solutions, operates as Snowball's distribution channels.
"It's similar to the Western Pacific structure, where essentially what we are doing is Snowball is licensing them and then we are acquiring a share of their gross revenue in perpetuity," McDonald said.
"So effectively they are swapping some income for capital and also taking a little bit of money off the table in the form of cash and then some Snowball shares."
McDonald would not reveal the name of the firms, but said the licensing deal would not result in the groups undertaking a rebrand.
It is unknown, however, whether Snowball will integrate the three practices into the Snowball Group in future.
"That depends; we will work with them on that. Either they come wholly into the Outlook group or we help fund in a younger adviser who wants to over time buy into that practice. And we can effectively help fund that person in. Normally that would be an existing employee," McDonald said.
"We have a healthy pipeline of opportunities and we're very happy with that pipeline as it stands."
The revenue acquisition of the three groups marks the second purchase agreement for Snowball in the past two months. In December, it acquired Sydney-based practice IFP.
The latest acquisitions, coupled with the IFP transaction, are expected to contribute about $800,000 to $1 million in profit earnings before interest, taxes, depreciation and amortisation (EBITDA) to Snowball on an annualised basis.
In terms of Snowball's organic growth, the group stands by its guidance for organic year-on-year growth in EBITDA for the 2008 financial year of 15 per cent.
