It has recently been reported that Aldermore has taken a 48% stake in the parent company of a group that includes a commercial finance broking outfit called Asset Finance Solutions (UK) Ltd and another called Synergy Commercial Finance Ltd
This is an unwelcome step to the rest of the broking market who may be unwilling to introduce business to a finance company that owns one of their competitors.
The home pages of both Asset Finance Solutions (UK) Ltd and Synergy Commercial Finance’s websites states quite clearly that they are independent commercial finance brokerages not lenders” but ethically how can they state that they are independent when a funder has a significant shareholding in the parent company as well as two directors on the board.
The home page of Asset Finance Solutions states quite proudly on their home page that “Asset Finance Solutions was formed in 2005 and has quickly grown to be one of the UK’s leading independent funding providers” which again is misleading.
Both company websites have either a blog or news section yet neither mentions anything that might cause readers to question exactly how independent they are as any comment concerning their new substantial shareholder is conspicuous by it’s absence. One wonders why the appointment of a new sales director is deemed to be newsworthy but the selling of a significant share stake to a challenger bank is not.
As a specialist factoring broker I have long refused to deal with Aldermore so their stake in a brokerage won’t affect me directly but I wonder how companies that approach either AFS or SCF expecting independent advice will feel if they are introduced to Aldermore without being told that they are significant shareholders.
Aldermore aren’t the first to try to buy market share by acquiring their own broking firm but it didn’t work out too well for the first factoring company that tried it and they quickly gave up the pretence and changed their subsidiary’s name to their own.
Presumably there are going to be a number of genuinely independent commercial finance brokers who will no longer wish to deal with Aldermore as they will be worried that their clients will find their way into the database of Aldermore’s broking arm and in all honesty I can’t blame them.
Hi Ian,
It was interesting to read your blog, but I do think your are making a number of assumptions which are unfounded.
Firstly, Aldermore only buying 48% of the shares of AFS was a conscious decision by Aldermore and the Shareholders of AFS. I can confirm that AFS have been approached by a number of parties over the last few years who wished to purchase all the shares of the business, but those approaches were turned down as the Directors believe the business is only part way to achieving its goals.
Secondly, Aldermore bought into the business because of the business model which is a network of independent brokers that take advantage of the purchasing power and compliance capability of the group. If Aldermore and the Directors of the business attempted to force those brokers to use Aldermore that would invariably drive most of those brokers away from the network, which would be commercial suicide and undermine everything that AFS has achieved.
Thirdly, the 2 networks: AFS and Synergy now have access to over 200 funding partners and that panel of funders continues to grow, surely if Aldermore were trying to control the origination that panel would actually be reducing ?
The point is the business model is the reason why Aldermore invested in AFS, what they now have is access to a micro version of the industry where they can look to improve their offering which potentially they can then offer to the wider market. At the same time they are buying into a Group growing at 15-20% per annum that will place in excess of £350m of asset and commercial finance business this year and return well over £1m of profit.
As far as Aldermores wider brokers partners having concerns about AFS having access to their database and customers ? why would Aldermore jeopardise a £1bn business they have a 100% control of to benefit a business they have a 48% share in ? That really doesn’t make any commercial sense whatsoever.
Thanks for the response Mike. I’ll leave it up to the readers to decide what Aldermore’s motives are as you are asking us to believe that they are happy to have bought a significant stake in a broking outfit that is likely to be placing upwards of £350m of business with their competitors. Somehow it doesn’t ring true to me much as it didn’t a few years ago when a major factoring company bought out a broking company claiming that it would be operated completely independently.
If Aldermore and AFS wish to convince the world at large that enquiries won’t be funnelled though from one to the other AFS could make a start by removing all references to being independent from their website as well as updating their news and blog sections by making reference to their new shareholder
Hi Ian, This would be a very boring world without different opinions and I respect your view. I think as you say it is down to the readers to decide and as I stated earlier they have to decide whether Aldermore would risk a £1bn business that they control 100% of in favour of a business in which they don’t have a controlling shareholding where the model has been built around independent brokers who have direct relationships with the funding panel.
If the deals were controlled centrally then there might be some foundation to the assumption, but our people deal directly with the funders and propose the deals directly to the Funder of their choice.
Interestingly enough the investment from Aldermore has seen a number of our funding partners improve their service to us considerably, so its been a win win for our people and our customers.
Maybe you should ask one of our network members to give their view on the impact of the investment and whether or not they feel under pressure to put more business to Aldermore, or has it been business as usual ?
On our coverage of the investment on our web pages, you are correct, we probably should have made more of it, but from our perspective nothing has changed from a business perspective. We now have a FTSE 250 bank as a shareholder, which we see as underpinning the business during what could be a uncertain period from an economic perspective.
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Interestingly enough the investment from Aldermore has seen a number of our funding partners improve their service to us considerably, so its been a win win for our people and our customers.
That doesn’t say a great deal for the service that those funding partners have been giving you and your clients in the past then as we won’t deal with anyone that gives less than first class service at any stage 😀
I guess service levels are relative, we do around 600-700 deals a month and in many cases we are the funders largest introducer. When you do the level of business we do and when you collect information around decisions and turnaround times which we do, you can see when a specific funder improves their service levels. We also share information internally via our global email and I constantly see messages from Network members singing the praises of funders who have gone above and beyond to get a deal completed.
What I was saying is that some of our funders have stepped up from what were already very good service levels in comparison to their piers.
As stated before we have been approached by several parties in the market who wanted to buy the business completely, but invariably they were just focussed on the originations. Aldermore were fundamentally different, I can confirm that we have no targets in respect of business we have to put to Aldermore, its up to Aldermore to offer the best solution for the network member and their customer. I can also tell you that some of the Network members have actually placed less business with Aldermore since the investment, I guess they want to see what the reaction will be and they have the freedom to do that, again it’s up to Aldermore to win them back.
At the end of the day, we have an obligation to our network members too provide the best environment for a broker wishing to operate in the asset and commercial finance market, enabling them to offer the most competitive and flexible products to their customers. In many cases the products we offer may well not be an Aldermore product, because they simply don’t offer a solution of the best solution, so having access to the wide range of providers we have is the only way we can meet our obligation to those network members.
The involvement of Aldermore means we now have a very firm foundation to build upon, we have access to resources we previously could only dream of and we also now have the ability to develop products and offerings that again historically we couldn’t.
This partnership may well not work for many brokers in the market, some will sell in total, some will wish to remain on their own, but this works for us because we are confident that it will enable us to meet our long term goal of providing our network members with everything they need to develop and build their businesses. At the end of the day the only way this business works is if the network members that work with us succeed, we are only successful if they are successful.