Tenet Group has disposed of its appointed representative (AR) groups in deals with LSL and The Openwork Partnership following a strategic review.
The deal sees LSL acquire Tenet Group mortgage and protection network TenetLime for £12.9m. LSL added it plans to integrate TenetLime into its Primis network.
In addition, The Openwork Partnership has reached an exclusive agreement in which Tenet’s wealth business’ firms and advisers will be offered a fully supported transfer to The Openwork Partnership, with the option to retain their independent status in the 2plan Wealth Management network.
Mortgage and protection network acquisition
LSL will acquire the entire issued share capital of Tenet Group subsidiary TenetLime, adding 378 advisers working within 157 firms to its financial services network business.
TenetLime operates a network providing services to 231 mortgage and protection advisers, operating within 133 appointed representative firms. Its advisers arranged around £3.9bn of mortgages in 2022.
The deal also includes consideration for the recruitment by TenetLime of 47 mortgage and protection advisers operating within 24 appointed representative firms, that are currently members of TenetConnect Ltd and TenetConnect Services Ltd. They are expected to transfer to TenetLime prior to completion.
The deal is subject to regulatory approval from the Financial Conduct Authority (FCA) and is expected to be worth up to £12.9m, with an initial payment of up to £5.6m calculated by the number of AR firms at completion and the turnover of these firms in 2022.
A further payment of up to £4.5m will be made depeneding on the number of AR firms 12 months following completion and the turnover of these firms in 2022, and an expected payment of £2.8m for assets which form part of TenetLime’s regulatory capital.
The total consideration payable at completion is subject to adjustments based on the net asset value of TenetLime at that time.
LSL is paying for the deal in cash, it said as of 30 June 2023 the group had a net cash balance of £36.0m.
After a short period of transition, TenetLime members will be integrated fully in the operations of LSL’s Primis Network.
LSL added the acquisition would allow it to “leverage its existing network infrastructure to deliver synergies and enhance the group’s margin”.
TenetLime reported profit before tax of £900,000 for the year ended 30 September 2021, at which date it had gross assets of £10.1m.
This profit figure excludes the contribution of the 24 appointed representatives firms currently members of TenetConnect and TenetConnect Services and which are expected to transition to TenetLime before completion.
Following integration into LSL’s Primis Network, LSL added it expects the transaction to be earnings enhancing in 2024.
Wealth business closure
Tenet Group also announced it intends to close its wealth network with an option to join The Openwork Partnership.
The business has more than 4,500 financial advisers based in over 820 firms, supported by more than 600 employees. Under the exclusive agreement Tenet’s firms and advisers will be offered the chance to join The Openwork Partnership – whether through its IFA business 2plan, or as part of the restricted Openwork proposition.
Openwork said the deal could introduce 170 new firms into The Openwork Partnership and add more than 360 new advisers to the network, and bring £6bn of assets.
The Tenet & You, Tenet Mortgage Solutions and Tenet Financial Services advisory brands will remain with the Tenet Group and continue to advise their customers without interruption.
Tenet Compliance Services is also retained in the group and will continue to support and provide compliance services and regulatory support for directly authorised advisory firms.
Tenet said a process of transferring customers, advisers and colleagues will be managed by Tenet in close co-operation with the respective counterparties. It expects all moves to be completed by mid-2024.
It added communications with network members and colleagues were underway and would continue throughout the sale and transfer processes.
Tenet said it will continue to operate all key services as normal during the transfer period. It does not anticipate any adverse impact on customers, who will continue to deal with their regular adviser as usual, or any member operations.
Strategic review completed
Phillip Hilling, chairman of Tenet Group said: “The board of Tenet is pleased to announce the completion of our strategic review which concluded that these transactions affecting Tenet’s appointed representative networks are in the long-term best interest of all stakeholders, and we are delighted to have secured well-established, successful businesses with matching cultures for our customers and their advisers.
“These outcomes provide certainty and sustainability for our appointed representatives, customers and employees and support our ultimate objective of producing good consumer outcomes.
“We look forward to working with Openwork and LSL in ensuring a smooth transfer of appointed representatives and our employees. On behalf of the board, I would like to thank our colleagues for their support and hard work in achieving this successful conclusion and wish them well for the future.”
Helen Ball, chief executive officer of Tenet Group, said: “Openwork and Primis have strong reputations for supporting appointed representatives and they can be confident that their new homes will allow them to grow with the support, freedom and control their businesses need.
“Our focus now is to work with all the parties in these transactions to deliver a smooth transition for our stakeholders.”
David Stewart, group chief executive officer at LSL, said: “I’m delighted we have been able to complete this transaction and I look forward to welcoming TenetLime’s advisers to our Primis Network.
“The increase in membership will help us to further invest in our service offering to member firms as well as delivering scale economics to support further growth.
“The acquisition also underpins our leading position in the mortgage and protection network market and is fully aligned with our group strategy to develop our financial services network business.“
Richard Houghton, chief executive officer at The Openwork Partnership, added: “Not only does this exclusive agreement represent a brilliant opportunity for The Openwork Partnership commercially, but it also demonstrates our continued commitment to ensuring everyone in the UK has access to financial advice.
“I’m delighted that we can support those advisers impacted by Tenet’s decision and offer them a positive outcome from the situation. The fact that we can provide such a wide range of options to the Tenet Wealth Management firms demonstrates the breadth and strength of the The Openwork Partnership.”