Paul Tynan

Irrespective of the countless articles that have been written and published on strategies to ensure that sales, mergers and acquisitions are successful and realise their potential, Connect Financial Service Brokers (Connect) CEO Paul Tynan is certain that the financial service industry as a whole will again get the process wrong in 2014.

“The financial planning sector has a 30 year track record of failed acquisitions which today is reflected in the loss of client value, advisers, management and capital investment written off”, said Paul Tynan.

Furthermore, this failure to achieve a successful outcome and get it right was not restricted to one segment of the industry – it was prevalent from the largest corporate to the small one person suburban practice.

Paul Tynan continued, “Large corporate businesses do not have a monopoly on failed transactions, I have also seen small businesses and individual financial planners make the wrong decisions based on their last BDM/PDM conversation or whoever has the biggest cheque book”.

For advisers, wrong decisions include joining a badly chosen Dealer Group, leaving the right Dealer Group, taking on an unsuitable partner, selling when they should not and list goes on.

Reflecting on his extensive experience in this field, Paul Tynan said that the people/businesses that make the wrong decisions have one or more of the following factors in common:

• Thinking only in the short term
• Lack of industry knowledge and insight
• Lack of networks and resources
• Did not have M&A experience or expertise
• Did not plan properly
• Focussed only on the bottom line
• Personal or unforeseen circumstances saw them rush to do the deal

Another critical factor can be attributed to those instances where the financial planner or dealer group principal is simply not mentally engaged in the process and as he / she wants to exit and move on as quickly as possible.

Paul Tynan said another reason for sale, M&A failure can be attributed to an overemphasis on the transaction and bottom line and not enough attention placed on the very important cultural and staff fit – the things that are hard to measure!

In the past buyers have focused on FUM or bottom line numbers and neglected to factor in the non-measurable issues such as:

• Key person risk
• Business culture
• Management issues
• Compliance
• Is the owner ‘ready’ for sale

These are the soft people issues that are so important to the success of any sale, merger or acquisition.

Paul Tynan also pointed out that Australian companies have a particularly bad track record with overseas acquisitions – again reflecting this lack of understanding and appreciation for the non transactional aspects of a business such as the impact of ‘cultural issues’ and has led to commercial disasters in this area.

Experience has confirmed for Connect that the best outcomes can be seen when firms have enlisted professional help to assist them throughout this process. The cost of engagement is a small price to pay compared to the loss of capital, clients, business disruption, etc.

Paul Tynan concluded, “Whether selling, merging or acquiring, it is important to understand that the process takes time in order to achieve the desired outcome and in many cases, the parties will only have a single opportunity to do it right.”

“So irrespective of size, businesses would be better off outsourcing their selling, merging and acquisition activity as the cost of engaging a consultant can never match the loss of shareholder capital and opportunity cost for bad decisions”.

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• In line with anecdotal evidence, consumer spending strengthened in February. The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February, ahead of a slightly smaller gain in January and the strongest result in 18 months. Of further encouragement only two of the 20 industry sectors recorded weaker sales in February, down from three sectors in January and four sectors in December.
• In seasonally adjusted terms the BSI rose by 0.4 per cent in February – the third gain in four months.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities.
• The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines. The BSI had consistently underperformed against the Australian Bureau of Statistics retail trade series over the past year but the period of under-performance appears to have come to an end.

What does it all mean?

• The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February after a gain of just under 0.5 per cent January. The BSI is now recording the strongest monthly growth in 18 months.
• The BSI had consistently under-performed against the Australian Bureau of Statistics retail trade series over the past year but the period of under-performance appeared to have come to an end. The earlier tentative signs of improvement in spending are now being translated into firmer readings for the trend series.
• The trend estimates are constantly revised with the addition of new data. And it is clear that the tentative signs of improvement in spending identified in recent months are now being translated into firmer readings for the trend series. Previously, spending was shown to have declined by 0.2 per cent in trend terms in January, but the revised figures are now showing growth of almost 0.5 per cent.
• In recent months, a key source of encouragement had been the fact that the majority of industry sectors were recording spending growth in trend terms. There was similar encouragement in the February data with only two of the 20 sectors reporting weaker spending in trend terms, down from three in January and four sectors in December.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) rose by 0.5 per cent in trend terms in February after a gain of just under 0.5 per cent January. The BSI is now recording the strongest monthly growth in 18 months.
• The trend estimates are constantly revised with the addition of new data. And it is clear that the tentative signs of improvement in spending identified in recent months are now being translated into firmer readings for the trend series. Previously, spending was shown to have declined by 0.2 per cent in trend terms in January, but the revised figures are now showing growth of almost 0.5 per cent.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. This allows analysis of the broader underlying trends that may be hidden in the raw data.
• In seasonally adjusted terms the BSI rose by 0.4 per cent in February after an upwardly revised increase of 2.4 per cent in January.
• In recent months, a key source of encouragement had been the fact that the majority of industry sectors were recording spending growth in trend terms. There was similar encouragement in the February data with only two of the 20 sectors reporting weaker spending in trend terms, down from three in January and four sectors in December. And the biggest industry category – retail stores – rose by 0.9 per cent in February, the sixth straight gain.

• Across the industry groups, the only sectors to record weaker spending in trend terms were Automobiles &  Vehicles (includes services stations as well as car and boat dealers, tyre and auto parts stores) with sales down 0.1 per cent, and Mail order & telephone order providers (down 0.9 per cent).
• The strongest lift in spending in trend terms was by Repair services (up 2.2 per cent) followed by Amusement & entertainment (includes motion picture theatres, bowling alleys, golf courses and video stores), up 1.6 per cent. Encouragingly, the Business services sector has recorded consistent growth for the past 13 months.
• In annual terms, just five of the 20 industry sectors contracted in February, down from seven sectors in January. The weakest sector was Mail Order and Telephone Order Providers (down 15.7 per cent on a year earlier), followed by Automobile & vehicles (down by 10.6 per cent) and Miscellaneous stores (down 8.1 per cent).
• At the other end of the scale, spending at Contracted services (includes building trades such as electricians as well as veterinary services) was strongest, up 9.3 per cent, followed by Professional services & membership organisations, up by 8.6 per cent.
• None of the states and territories recorded weaker sales in trend terms in February. The weakest result was in Queensland (flat) while Victoria was strongest with a 0.7 per cent rise. Of the other states and territories, next strongest were South Australia and Tasmania (both up 0.6 per cent), followed by ACT and NSW (both up 0.4 per cent), Western Australia (up 0.2 per cent) and Northern Territory (up 0.1 per cent)
• In annual terms, the only state/territory to record growth in February was NSW (up 2.5 per cent). At the other end of the scale, the spending gauge was weakest in South Australia (down 7.2 per cent), Northern Territory (down 7.1 per cent) and Queensland (down 7.0 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

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• The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in trend terms in December after previously falling for twelve straight months. But the weakness remains narrowly based with only five of the 20 industry sectors recording weaker sales in the month.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities.
• The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines. The BSI has consistently underperformed against the Australian Bureau of Statistics retail trade series over the past year.

What does it all mean?

• The Commonwealth Bank Business Sales Indicator (BSI) was broadly unchanged in trend terms in December, the best reading for over a year. The BSI had previous fallen on a trend basis since December 2009. While growth in economy-wide spending remains elusive, the good news is that the majority of industry sectors are still expanding rather than contracting.
• The unchanged reading for the BSI compares with a trend decline of 0.2 per cent in November and 0.3 per cent fall in October. The trend measure of the BSI has been improving (recording smaller monthly declines) over the past five months.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. This allows analysis of the broader underlying trends that may be hidden in the raw data.
• A key source of encouragement in the latest data is the fact that the majority of industry sectors recorded spending growth in trend terms. In trend terms, the value of spending transactions fell in only five of the 20 industries in December, down from eight sectors in November. And the biggest industry category – retail stores – rose by 0.5 per cent in December, the fourth straight gain.
• Encouragingly, the Amusement & entertainment sector recorded growth of 0.5 per cent in December, the best reading in 14 months. The sector includes motion picture theatres, bowling alleys, golf courses and video stores.
• Both Business services and Government services have also recorded consistent growth for the past six months.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in trend terms in December after previously falling for twelve straight months. But the weakness remains narrowly based with only five of the 20 industry sectors recording weaker sales in the month.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software to the raw data. The adjusted figures reveal the broader underlying trends that may be hidden in the raw data.
• Across the industry sectors, the strongest gain was recorded by Automobiles & Vehicles (includes services stations as well as car and boat dealers, tyre and auto parts stores) with sales up 0.9 per cent. Mail order & telephone order providers also recorded a 0.9 per cent rise, followed by Professional services and membership organizations (up 0.7 per cent) and Repair services (up 0.6 per cent).
• The weakest sectors in December in trend terms were Automobile & vehicle rentals (down 1.2 per cent) and Miscellaneous stores (down 0.8 per cent). Hotels and motels fell by just 0.1 per cent in December but the growth rate has consistently weakened over the past six months.
• In annual terms, eight of the 20 industry sectors contracted in December. The weakest sector was Automobile & vehicles (down by 13.2 per cent on a year earlier) followed by Mail Order and Telephone Order Providers (down 12.7 per cent) and Miscellaneous stores (down 11.5 per cent).
• At the other end of the scale, spending at Personal service providers was up 6.9 per cent on a year ago. Personal service providers include laundries, hairdressers, shoe repair and tax agents. Next strongest was Government services, up 4.4 per cent, and Professional services & membership organisations, up 4.3 per cent.
• Only two of the eight states and territories recorded monthly trend growth in December: NSW (up 0.6 per cent), followed by Western Australia (up 0.4 per cent). The job market has strengthened in recent months in NSW, serving to boost business sales. Spending was largely flat in the ACT and Tasmania. Spending fell most in Northern Territory and Victoria (both down 0.8 per cent), followed by South Australia (down 0.4 per cent) and Queensland (down 0.1 per cent)
• In annual terms, the only state/territory to record growth in December was Western Australia (up 1.6 per cent). At the other end of the scale, the spending gauge was weakest in Victoria (down 10.6 per cent) followed by South Australia (down 8.8 per cent) and Northern Territory (down 7.1 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

What are the implications for interest rates and investors?

• In the near term retailers will need to continue discounting in an effort to sustain activity. However whilst overall economy-wide spending remains elusive, the good news is that the majority of industry sectors are still expanding rather than contracting.
• The BSI had previously fallen on a trend basis since December 2009, meaning that the latest figures paint a much better picture for business sales as we begin the New Year. The job market has strengthened in recent months in NSW, serving to boost business sales.

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• A recovery in spending across the Australian economy remains elusive according to a key gauge.The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in October after weakening for 10
  straight months. The September survey had suggested that spending was turning higher, but unfortunately for retailers there was no validation in the latest results.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities.
• The Commonwealth Bank BSI remains well down on a year ago. The Commonwealth Bank BSI fell by 3.9 per cent in trend terms over the past year, the biggest annual decline since data was first collected six years ago.

What does it all mean?

• It’s very clear that recovery in spending across the Australian economy remains elusive. After contracting for ten consecutive months, spending across Australia remained slow in October, according to the latest Commonwealth Bank Business Sales Indicator (BSI) released today.
• The BSI has under-performed against the Australian Bureau of Statistics narrower retail trade series, especially over the past six months and has contracted by 3.9 per cent in trend terms over the past year. Given that the BSI is far broader in coverage then ABS retail trade, incorporating business and government spending, the results highlight the weakness of spending across the economy.

What do the figures show?

• The Commonwealth Bank Business Sales Indicator (BSI) was unchanged in trend terms in October. At face value this appears encouraging, given that the BSI had previously fallen for ten straight months. However the September survey had suggested that spending had started to grow again. Unfortunately the latest trend estimates have revised away the previous strength, and are now suggesting a flattening of spending across the economy.
• The Commonwealth BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with its retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software to theraw data. The adjusted figures reveal the broader underlying trends that may be hidden in the raw data.
• Unfortunately the encouraging signs that were apparent in the September BSI weren’t validated in the latest estimates for October.
• The BSI is still well down on a year ago. The BSI has contracted by 3.9 per cent in trend terms over the past year, the weakest result in the six-year history of the spending gauge. The BSI has under-performed against the Australian Bureau of Statistics narrower retail trade series, especially over the past six months. Given that the BSI is far broader in coverage than ABS retail trade, incorporating business and government spending, the results highlight the weakness of spending across the economy.
• In trend terms, the value of spending transactions fell in only five of the 20 industries in October; an improvement on September when six sectors went backwards. The strongest sector was Business services (up 1.1 per cent), followed by Contracted services and Personal service providers (both up 1.0 per cent).
• The weakest sector by a fair margin in October in trend terms was Mail order & telephone order providers (down 2.0 per cent) while Miscellaneous stores was down by 0.8 per cent. And while Automobiles & vehicles recorded no change in spending in October, spending had fallen for the previous nine months.
• In annual terms, 11 of the 20 sectors reported growth in October. Leading the way was Personal service providers (up 8.1 per cent) followed by Utilities (up 6.5 per cent), and Hotels and motels (up 4.6 per cent). At the other end of the scale, spending at Mail Order and Telephone Order Providers was down 18.1 per cent on a year earlier followed by Automobile & vehicles (down by 14.5 per cent) and Miscellaneous stores (down 12.2 per cent).
• Only three of the eight states and territories recorded negative monthly trend growth in October: Queensland (down 1.0 per cent), Victoria (down 0.9 per cent), and South Australia (down 0.8 per cent). Spending rose most in Northern Territory (up 1.1 per cent), followed by Western Australia and Tasmania (both up 0.5 per cent), NSW (up 0.4 per cent) and ACT (up 0.1 per cent).
• In annual terms, spending growth was strongest in Northern Territory (up 3.8 per cent) and Western Australia (up 1.4 per cent). At the other end of the scale, the spending gauge was weakest in Victoria (down 7.7 per cent) followed by Queensland (down 6.7 per cent), South Australia (down 5.9 per cent), Tasmania (down 3.8 per cent), NSW (down 3.6 per cent) and ACT (down 0.9 per cent).

What is the importance of the economic data?

• The Commonwealth Bank Business Sales Indicator is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia. Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms.
• The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

What are the implications for interest rates and investors?

• Whilst overall spending remains fragile, there are still shining lights in the economy. We are seeing certain sectors and states continuing their positive growth trajectory and there has also been a rebound in spending in certain states such as NSW and in sectors such as business services
• Consumers remain very selective and continue to shop for the bargains, so retailers will continue to face downward pressure on margins.

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