PLUS
Building on its core business of probate valuations, PLUS quoted Stockval Holdings intends to breathe new life into the business of death. Andrew Chilvers reports.
If death and taxes are the only certainties in life, then Ben Giesbrecht could well have cornered a valuable part of the market.
Probate is often viewed as the unfashionable sibling of the financial services industry, off the radar for much of the deal making fraternity. Enter Giesbrecht, a well connected City operator and formerly head of acquisitions at Arbuthnot and an investment manager at Williams de Broe . He’d been aware for some time that, in his words, “there’s death after life in stockbroking” and in 2005 he created Stockval Holdings out of a private company of the same name as an acquisition vehicle.
Stockval was formerly a lifestyle business run almost as a part-time hobby by a City broker, who prefers to remain anonymous. The company was first set up as an outsourced probate and valuation service in 1988 to save brokers time and energy employing in-house staff to deal with the work. Over time Stockval drummed up good business and now has some 40 blue chip institutions on its books. Giesbrecht’s idea has been to form the holding company and take it onto a public market, raising funds for organic growth and bolt-on acquisitions. He also plans to diversify the portfolio away from just probate businesses.
The first part of Giesbrecht’s grand scheme came to fruition in early June when Stockval floated on PLUS for 18.5p a share, pricing the company at £1.2 million. At the same time Stockval raised £224,000 from private investors and started wrapping up its first acquisition for £677,000, paid for in cash, shares and loan stock. This is estimated to raise the company’s market cap to some £1.6 million. Giesbrecht claims that Stockval will also gain a highly experienced non-executive director as part of the package [he’s the chief executive of the acquired company’s parent]. But all names involved remained embargoed at this time.
As a result of the acquisition, operating profits are estimated to almost double in the first full year to some £188,000 from £100,000. With further acquisitions in the pipeline, estimates for operating profits increase to £620,000 by 2009.
Going forward Giesbrecht’s plan is to continue to focus on the outsourcing element of the business and create economies of scale by integrating other operations.
Moreover, an important departure from the probate-only model of the past for Stockval is its drive into the Self Invested Personal Pension (SIPP) market. A typical SIPP owner is a wealthy individual with money invested in regulated shares or unit trusts or more creative investments that include property, art, wine and stamps.
With recent government pension reforms, particularly with the introduction of Real Estate Investment Trusts (REITs), Giesbrecht believes Stockval is ideally placed to cash in on the opportunities offered by the reforms.
“Our largest growth market and one that has seen the biggest turnaround is pensions,” Giesbrecht says. “Since last year SIPP valuations have been prepared on the same basis as probate valuations. This rule change has not yet been implemented by a lot of financial organisations, but we are going to be reminding them of the need to value SIPPs like probates in future, and as they start to take this on board the more it helps us.”
As a result a new market has opened up for Stockval and the company has already picked up a couple of major clients. “The SIPP market is still growing quickly,” Giesbrecht adds. “Also the change in regulation means there’s a new distribution channel for us, so that’s organic growth that will take us from an over-reliance on probate.”
The catalyst to list on PLUS ahead of schedule was the forthcoming deal. It was also a sweetener for other potential acquisitions that Giesbrecht has been working on. Indeed, he admits to “talking to people all the time and it does help that we have this quoted paper”, which will become part of the deals he has planned.
“I’ve always been comfortable working in a quoted area, as a broker and a senior manager in a quoted group and then as an adviser to a company,” Giesbrecht continues. “So it’s natural for me to use it for its best advantage to move quickly to expand rather than staying private.”
Giesbrecht’s ambitions involve acquiring other companies in the wider valuation market and looking at larger deals – although funds for those rely on creating a critical mass to attract the right funders.
“We might be small, but we are perfectly formed,” Giesbrecht jokes. “We’ve had indications of ongoing funding support for larger deals from people we’ve talked to in this round of funding who have said ‘you’re a bit small at the moment, but come back to us later’.
“A classic tale; you start adding noughts onto the deal and people start giving you more money.”