Accounting and financial services company Kelly and Partners (ASX: KPG) is accelerating its national expansion plans with the acquisition of a new firm located in Gosford, NSW as part of a strategy to roll up accounting businesses that can become Top 100 firms by size.
The strategic acquisition will provide a Kelly Partners subsidiary with 51% ownership of the new Central Coast business with the remaining 49% owned by the existing owners as part of the KPG’s Partner Owner Drivers model. Under the structure, the existing office will be merged into the Kelly Partners Central Coast office located in Erina, NSW while migrating the acquired Group’s clients across private wealth management, life insurance, finance broking, accounting and tax over.
“The acquisition confirms the attractiveness of the Kelly+Partners offer and our Partner-Owner-Driver™ model to owners with progressive accounting firms,” said KPG Founder and CEO, Brett Kelly.
“We are pursuing a focused strategy of building each of our locations to a size that dominates their region and would have each of them qualify in their own right as a Top 100 accounting firm by size.
“We believe that this scale in each location makes our businesses more competitive and sustainable, and more attractive to clients as well as talent.”
As consideration for their 51% acquisition of the Gosford-based Group, KPG will pay $3 million to the vendors with 40% retention payable in two years and be funded with debt in the relevant operating entity.
The acquired Group is expected to contribute annualised NPATA around $300k – $400k.
The tack-on acquisition continues a focused strategy of expanding by acquisition with it being Kelly and Partners’ tenth since listing on the ASX in 2017.
For the half-year ending 31 December 2020, Kelly and Partners reported $24.8m revenue which represented a 5.8% increase on the previous corresponding period. Profit margins however have continually grown as acquired firms are integrated into the Kelly and Partners model with NPATA up 17.8% to $6.2m over the same period.