MAB to ‘strategically invest’ in broker businesses

While the company currently runs as a branded broker network in Australia, it is now rolling out a new model where it will enable brokers to retain their own brands, but come into the MAB Group via a strategic investment agreement.

The MAB investment could take several forms – including cash for equity, growth funding for equity i.e. funding for staff, or through a debt facility with no equity exchange – and aims to provide funds to help a broker build their business, while developing agreed goals to help them achieve their vision.

According to MAB, which aggregates under AFG, the investment will enable brokers wishing to retain their own brand identity to grow with the broker network’s financial and business support. It suggested this could be particularly beneficial to businesses that are currently hamstrung by insufficient cash flow or capital but wish to grow to realise their business goals or bring on new employees.

MAB suggested that the new strategic investment program was different from other offerings in market, as it was based on brokers continuing to grow their own business, “not MAB growing the business for the broker”.

However, as the core proposition remains a commercial agreement with MAB, brokers would need to come under the MAB Group (which aggregates under AFG).

Speaking to The Adviser, MAB managing director Darren Cantor explained: “By us investing in a broker’s business, whether it’s a 25 per cent stake or cash flow lending, it’s taking a bit of money off the table for them and they can reinvest that money and do whatever they wish to not only reduce key person risk, but also use that investment to grow.

“We’re not here to own the company, we still want the brokers to be the owners of the company, but we can just become shareholders and be much closer by being a strategic partner.

“This is also a genuine way to actually provide brokers with a third option to monetise or exit their business (if they wish to do so)... It gives them someone they can rely on to say ‘we will buy you out’. 

“We can actually work together to create more enterprise value inside the business, because that’s actually what you should be trying to sell in the future; something that has maintainable earnings. That can be through profit beyond just the trail books; building a team, and looking at multiples of EBIT of profit.

“We think the investment reinforces that we’re genuinely here to be invested in your business – whether that be financially or not – as a strategic partner. We’re going to be held accountable for what we do and the owner is going to be held accountable too, because if we’re investing in something, we all want to get a return out of that and we want to grow the business.”

Mr Cantor added that MAB Australia was following in the footsteps of a similar program that is up and running in MAB’s UK network, where it currently has investments in around a quarter of its network firms – which are principally non-controlling investments.

“The UK has a long track record of doing this, whereas investing in firms in Australia is not that common… There are a lot more employed brokers in the UK and we sense that’s going to happen here too. Where the firms in the UK see a lot of value added is where they employ the brokers outright, so that the value is retained by the business instead of having a collection of self employed brokers where a lot is being paid out,” Mr Cantor said.

“These types of investments enable these business owners to do that. It gives them the confidence to go out and employ these new people knowing that we’re there to back them through the long haul, and help them with that cash injection to actually execute that.”

The new program in MAB Australia comes as the UK arm of the business continues to build growth. The listed broker network recently acquired a 75 per cent stake in tech-based specialist lending intermediary Fluent Money, with plans to fully acquire the business in the next six years.

Fluent currently has around 425 employees, including 125 advisers, and offers advice on residential mortgages.

[Related: Brokers need to stop throwing leads away: MAB]