Fairpoint says the purchase marks its move into a broader based financial solutions business for financially stressed consumers.
It says it expects the acquisition of financial product comparison website Moneyextra.com to increase non-Individual Voluntary Arrangements (IVA) revenues to around a third of Group revenues from the final quarter of the year.
In March in its preliminary results, Fairpoint outlined a strategy to generate 20% of revenues and gross profits in the 2010 financial year from non-IVA sources, compared to 12% in 2009.
Moneyextra’s product comparison capability allows consumers to find lower prices in the markets for insurances, utilities, media, mobile phones, lending products, savings and investments.
Fairpoint says the acquisition follows organic growth in the first part of the year, and says company at the half year point it is on track to meet its targets.
The transaction is structured to bring together Moneyextra’s product sourcing and comparison platform, with the Fairpoint’s business lead generation of customers seeking ways of reducing their spending and managing their finances.
Fairpoint says it is looking to Moneyextra to further improve on the 33% of customers it was able to provide solutions for after it introduced some money saving products in the first half of 2010.
It says: “Both businesses believe that by combining web capability and product supply with a receptive customer base we have the potential to create a strong customer franchise for money saving services and reach customers at lower cost than conventional price comparison distribution allows.”
The transaction is structured so Moneyextra contributes its platform and Fairpoint its lead base and infrastructure, with the eventual purchase price dependent on the form of the profits generated in Moneyextra.
Initial consideration is £1 with up to a further £1m of working capital being made available to Moneyextra in the current financial year to replace existing borrowings, fund integration activity and support revenue growth.
Further earnout consideration is payable to the vendors based on a multiple of 49% of the future earnings of the Moneyextra business.
On completion, Fairpoint directors expect the ultimate consideration to be approximately £8m.
