CEO behind potential merger talks on deal

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Vow Financial chief executive Tim Brown has confirmed wealth management company Yellow Brick Road's (YBR) ASX report regarding market speculation.

Yellow Brick Road took to the ASX late Friday to put the brakes on rampant speculation as to which company it could be taking over.
On Friday, six weeks after YBR told investors it had entered into three exclusivity agreements on potential unnamed acquisitions, chief financial officer Richard Shaw announced on the ASX that nothing is settled – but they are in talks with mortgage broker aggregation group Vow Financial.
“Yellow Brick Road Holdings Limited (the Company) is aware of media speculation concerning potential acquisitions by the Company of certain named companies,” said Shaw.
“The Company is in discussions with the board of Vow Financial Holdings Pty Limited. At this time, no binding agreement has been entered into, other than the parties being in exclusive arrangements.”

Brown confirmed to Wealth Professional’s sister publication Australian Broker the company was in discussions with YBR, but said until Vow gets a final offer he cannot say much more.

The CEO does not know when such a final offer is likely to come. “At this stage we’re still waiting for confirmation.

“Any business looking to consolidate or merge is looking for scale – with it comes better rates, better commissions, all the better opportunities that come with being a bigger business.”

Vow has $19.2 billion worth of loans under management and has partnerships with more than 700 finance and mortgage brokers.
When YBR chief executive Matt Lawler announced the company’s March quarter results last week, he said the main focus of the quarter had been to branch and client activity and progressing acquisitions.  

Despite executing its first major digital campaign, the fast-growing company is still operating at a loss. It reported a net operating deficit of $1.11 million, which is still a 17% improvement on the previous quarter.
Receipts from branch customers increased on last quarter by 2% to $5.04 million – a 44% increase on the same quarter last year.

And although the home loan business still makes up the majority of the revenue (the company has built a home loan book worth $2.44 billion in just over three years), YBR’s growth in wealth management versus lending is above trend.

Executive chairman Mark Bouris said the company has tapped into a market that is completely underserviced because the major players in the financial planning industry tend to focus on retirees.

YBR on the other hand, services middle Australians who are still well entrenched in their working lives.

“When we started Yellow Brick Road, the pundits said we couldn’t make a wealth adviser out of a mortgage broker,” said Bouris. “Yet, here we are with the intellectual property to recruit, train and accredit individuals to provide the full spectrum of advice.”

Finalisation of an acquisition such as Vow would be likely to greatly boost YBR from its current share price of $0.605.


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