When Michael Burne joined Inter-Alliance as group legal director last December, he was tasked with launching a legal department suitable for the new business model. But Burne has still not been able to turn his attention to that because as soon as he arrived at the AIM-listed financial services group he was thrown into two significant deals.
“I literally arrived and hit the ground running. But now I’m turning my attention to which law firms we’re going to use and the balance between the internal legal resource that we absorb into our permanent cost base going forward and the external legal resource,” says Burne.
Burne steered Inter-Alliance through the final stages of a radical restructuring and then helped the company on a strategic acquisition. Inter-Alliance, which is one of the UK’s largest independent financial services businesses, has gone through significant changes in the past 12 months. After delivering a loss in 2001, there were a number of management changes at the company. Chief executive and chairman Keith Carby, operations director Gerard Moore, chief technology officer Mike Achilles and marketing director Carey Shakespeare were all appointed last year. Today, Inter-Alliance’s finances are looking healthier as the company has continued to evolve and expand with a possible full listing in the future.
Inter-Alliance’s new corporate structure was designed by the directors with assistance from Tite & Lewis. The firm helped the company to restructure its business operations so that the 87 associated companies that were previously majority-owned by individual independent financial advisers could be absorbed into Inter-Alliance. Now each of the independent financial advisers simply has a contract with Inter-Alliance that allows them to provide financial advice to clients with the Inter-Alliance brand name. Under the terms of the contracts, Inter-Alliance provides training to the advisers and supports them with marketing.
Under the old structure, all the independent financial advisers were essentially self-employed individuals who took a cut from their share of the company. However, Burne says that the old business model was not sustainable so a decision was made to substitute it for a more traditional one. The new structure provides massive scope for cost savings and creates economies of scale, says Burne.
He adds that the new structure also enables groups of advisers to work together because Inter-Alliance recognises that financial services is getting ever more complicated and acknowledges that the specialists are doing better than the generalists.
Despite the plummeting stock prices and continued economic uncertainty, Inter-Alliance is seeking to expand its operations through acquisitions and organic growth. In August 2002, the company bought HST Financial for £10.1m and last month it acquired Heartland, the troubled independent financial advisory business with offices in Cardiff, St Albans and Nottingham, for around £2.5m.
Under the terms of the Heartland deal, Inter-Alliance will pay £750,000 for the company’s net commission still to accrue and a further £1.75m subject to how many of Heartland’s 175 self-employed advisers move over to Inter-Alliance. Burne says that the company has already been approached by 160 advisers who are interested in switching to Inter-Alliance and is confident that the deal will conclude successfully.
Burne says: “Now is a unique opportunity for a company like ours to consolidate the sector into a sustainable market grouping. What we’ve got now is an opportunity to pick up other practices that cannot survive on their own because they don’t have the scale.
“With the acquisitions we’re doing, we’ve built a critical mass in the independent financial adviser sector. The regulatory environment is changing, which will allow us to do more and more things in the future, so the business is only going to grow.”
Burne returned to Tite & Lewis for assistance on the Heartland acquisition because he was impressed by the firm’s work on the restructuring. “This is the first significant piece of work that I have personally instructed Tite & Lewis on and it was an absolutely fantastic experience,” he says. ” The lawyers at Tite & Lewis are first class. They pulled out all the stops and had the right people available at the right time.”
Inter-Alliance has turned to Tite & Lewis after the company ditched Lawrence Graham from its panel last year. Currently, Addleshaw Booth & Co, McGrigor Donald and south-coast firm Blake Lapthorn are on the company’s panel. While Burne is considering adding Burges Salmon to the panel, he is also looking to make cuts in order to save costs.
“I’ve got a lot of respect for the partners at Burges Salmon and the work they do and their cost base is different to a City firm. I’m attracted by a regional firm to do a range of work for us and a City firm to do the deals,” says Burne.
Burne is expecting to reach a decision about the size and shape of Inter-Alliance’s legal panel by the end of next month.
Before joining Inter-Alliance, Burne was joint head of legal at St James Place, a FTSE-listed financial services company. He moved to Inter-Alliance because he was invited to join the board and because he wanted to move into the independent financial advisory sector.
“Ever seeking to get closer to the commercial decision, this [the Inter-Alliance post] was offered to me as a main board position at Inter-Alliance. It’s rare for a legal director join the main board and was a fantastic opportunity that proved impossible to resist.”
Burne trained at Denton Hall (now Denton Wilde Sapte) and in 1997 he joined Allen & Overy‘s intellectual property litigation team where he gained the commercial skills that allowed him to move to an in-house position.
Burne is supported by Anne Spence, who was formerly the head of legal at Abbey Life. Spence, the only other lawyer at Inter-Alliance, is employed on a temporary contract, but Burne is certain that she will stay permanently. Spence’s experience is very broad, but she specialises in financial services and employment law.
Burne is also the company secretary, but outsources this work and is hoping to hire an assistant later in the year. He is also planning to recruit a couple of junior corporate/commercial lawyers over the next 12 months.
Burne explains that the main challenge for Inter-Alliance is to continue with its strategy of expansion through acquisitions and organic growth. He says: “We’re not just interested in acquisitions. We’re also interested in recruiting advisers ourselves. We’ve had some recent successes in this area with large businesses wanting to join us. There’s a practice in Scotland that is in the process of joining Inter-Alliance, whose combined turnover is £1.1m. They’ve come on board without any acquisition costs for us.
“Our challenge will be to find the right targets, to pay the right price and to integrate them into our business model. What we’ve done is lay the foundations to allow that to happen,” he says.
|Annual Turnover||£50.1m for the year ending December 2001|
|Number of registered financial advisers||1,089|
|Annual Legal Spend||£300,000-£500,000|
|Director of Legal||Michael Burne|
|Reporting to||Chief executive, Keith Carby|
|Main law firms||Addleshaw Booth & Co, Blake Lapthorn, McGrigor Donald and Tite & Lewis|