The acquisition will be made by MAB’s wholly owned subsidiary, Mortgage Advice Bureau Limited, and the enterprise value of Fluent is estimated at £95m by MAB.
Fluent has around 425 employees, including 125 advisers, and offers advice on first charge mortgages, second charge, later life lending and bridging finance.
The acquisition will be funded by renewed and increased debt facilities, existing cash resources and an equity placing of £40m on the Alternative Investment Market. The amount paid on completion is expected to be close to £73m in cash.
Numis Securities is acting as MAB’s bookrunner and the process will be run through an “accelerated book building process”, according to the broker firm.
The acquisition is conditional on the equity placing and FCA approval and is expected to complete before the second half of this year.
The 75 per cent stake will be bought from Beech Tree Private Equity, as well as members of Fluent’s management team, including chief executive Kevin Hindley, commercial director Paul Ford, group managing director Simon Moore and chief operating officer Tim Wheeldon.
The purchase includes an agreement for MAB to acquire the remaining stake of the business after six years subject to Fluent’s financial performance.
MAB said that it has capped its “put and call option”, which obliges the owner to sell some of the underlying security at a specified price, at £118m.
It continued that Fluent is expected to grow rapidly and has seen a “significant increase” in lead flow, which is expected to increase revenue and earning before interest, taxes, depreciation and amortization (EBITDA).
Fluent’s predicted turnover for the year to March is £38.5m, which is up 45 per cent year-on-year, according to MAB. It added that Fluent’s profit is set to double in the calendar year 2022.
Speaking to Mortgage Solutions, MAB’s chief executive Peter Brodnicki (pictured), said that Fluent had an “exceptionally high quality” management team and it was “delivering really accelerated growth”.
He added that the rationale for buying it was that the firm had 14 years of centralised telephony advice experience with national lead sources, and that this was an area of key investment growth for MAB along with new build.
Brodnicki explained that MAB had entered the national lead space around a year ago, pointing to partnerships with Boomin, Beehive and MSM.
He added that the volume opportunities for national lead sources were high, citing comparison websites, property portals, savings and investment platform, credit agencies and big major affinity relationships.
“These types of contracts are not typically won by local or regional firms, instead a different operating model is required, typically a major centralised telephone operation with strong technology and scalability will be in poll position,” he explained.
He said that MAB’s aim is to use technology to help firms get more out of their current lead sources, but also target the significant opportunity of national leads.
He continued that the firm had strong in-house technology, strong lead flow, along with great conversion rate and productivity.
Fluent’s biggest area of growth was in mortgages, he said, but that they were still a major player in secured loans, with equity release and bridging being recent additions to their offering.
Typically with specialist lenders it worked with a panel that brokers would refer to and that would continue in the future, but it would also be introducing in-house licensing for specialist advisers, he added.
He said that as Fluent had in-house expertise in second charge, bridging and later life this would be “complimentary” to the licensing. Fluent would retain its branding, and this was due to the strong reputation that it had built.
Brodnicki said: “The Fluent acquisition is highly complimentary to our strategy of working with so many exceptional firms on a regional and local basis, with a strong focus on the estate agency and new build sectors.
He added: “These are exciting times at MAB, as we widen our addressable market and expertise in these new growth sectors, with technology developments coming through enabling our firms and advisers to generate and optimise more opportunities across all market segments.”
He continued to thank investors for their “their unwavering support in such challenging times”.
MAB ‘targeted’ in its investments
Brodnicki said that there may be consolidation in the sector at the network or broker level and said that some of its own business were being acquisitive and wanted to expand, which MAB was supportive of.
He added that future investments would have to “tick boxes” of strong management teams, strategic importance and deliver strong growth and market share growth.
“We are very targeted with our investments and have been for over 10 years now. It is a long-term strategy. We’re not there to sell these businesses, we are totally aligned with management to achieve objectives we are both committed to,” he explained.
Strong gross mortgage completions and adviser growth
In its annual results for 2021, gross mortgage completions, including product transfers, came to £22.8bn, which is a third up from 2020 figures.
It added that gross new mortgage completions, which exclude product transfers, for 2021 were £19.6bn, an increase from £14.9bn in 2020.
The firm continued that its market share of new mortgage lending was 6.3 per cent, up from 6.1 per cent in 2020.
Total adviser numbers grew by 19 per cent to 1,885, and mainstream advisers increased by 13 per cent to 1,649. It added that revenue per mainstream adviser was up 12 per cent.
Profit before tax grew by 56 per cent to £23.3m compared to 2022 and was up 31 per cent compared to 2019.
New build and national lead sources are main investment focus areas
Brodnicki said that looking ahead new build and national lead sources would be its two main areas of focus.
He explained that with specialist areas like new build one could “grow a higher-than-average market share”.
He continued: “Builders have also always been serviced by new build-focused firms. Builders are rightly quite demanding, they want firms that can meet their specific requirements and timescales. It’s not a market open to a large number of intermediaries, it is a selective sector.”
Brodnicki said that deal flow and predictability of lead flow was strong in new build, and it typically found fast growing businesses and high producing brokers in that sector.
He continued that it was “seeing no real let-up” in activity and that there was still “very strong consumer demand”. He said that the market might soften due to economic pressures but that there was “no sign for it at the moment”.
He added that this partially fuelled its focus on lead generation as it wanted to ensure all its firms are “able to squeeze out every opportunity in a tougher market in case there is any loss in activity”.
Brodnicki added that there was a strong remortgage market in 2021, and that first-time buyers had also been robust, but that growth was a lot “wider”.
“On the back of Covid there were many and new reasons why people wanted to move, from changing lifestyles and where they live and how they live. So obviously by definition, you’re seeing a far wider range of transactions happening, which is actually good for the market,” he explained.
He added that brokers had been “consistently busy” over the past year, which explained the uptick in adviser revenue.
“The market remains strong and generally our firms are constantly looking to improve on productivity and performance,” Brodnicki said.
He added that there was “equal focus on productivity” as well as adviser growth, and due to the quality and ambition of the firms with MAB, over 50 per cent of its growth had been organic.
