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Financial Services Business Valuation Issues 

Financial services industry includes:

  • Banking and credit unions​

  • Insurance services

  • Funds management

  • Superannuation funds management

The majority of businesses in this sector are large and listed on the ASX.  Smaller businesses operating in the SME sector include insurance and finance broking, funds management advice and financial planners.

These industries are facing significant change as a result of the Banking Royal Commission and a downturn in property prices.  These issues include:​

  • Training and registration requirements from past FOFA reforms

  • Changing fee and commission basis over the next 3 years

  • Reduced demand

  • Increased regulation

It is expected the industry will undergo significant rationalisation as small players decide to leave the market and new regulations will take effect over the next 2-3 years.  There is a great deal of uncertainty in the industry at present and this will impact EBITDA multiples significantly.

In some circumstances we would consider a 20% - 30% discount on some EBITDA multiples depending on the circumstances and features of the business.​

Key Industry Statistics

The wider Financial Services industry has grown 3.9% pa over the past 5 years to $800bn.  According to IBISWorld, there is a wide variety of industry revenue growth rates, including:

We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?

SME Performance Whitepaper

Key Drivers of Financial Services Business Valuations

A financial services business valuation is driven by key factors below such as: 

  • Size and geography of market coverage

  • Level of recurring revenue

  • Low reliance on key staff

  • Training of staff

  • Provision of a range of services 

  • Effective management systems and integrated IT systems

EBITDA Margins range from less than 15% to 35% (for some large businesses), depending on the size of the business, location, range of services, technology and automation.

Typical EBITDA Multiple ranges we have observed are:

  • Revenue of $1m - $10m: 0.5x - 2.0x

  • Revenue of $10m - $20m: 1.5x - 3.0x

  • Revenue greater than $20m: 3.0x - 5.0x

Our Business Valuation Experience

Our financial services business valuation experience has included including business valuations for:

  • Melbourne and regional based finance and mortgage brokers

  • Insurance brokerage

  • Financial planning practice

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