A trail book purchaser has announced the completion of a record sale for this financial year.
Trail Homes yesterday shared news of its acquisition of Australian Unity’s trail books after having successfully secured the tender in late January 2020.
The approximately two-million-dollar deal arose from the bank’s decision to divest its non-core business activities, including its mortgage broking operations.
“The deal was a record sale for this financial year, and delivered in a record time of six weeks - which is significant given its size, required due diligence and the complexity of the transaction,” said Nick Young, director of Trail Homes.
“In addition, it was in the best interest for all parties to ensure that ongoing client service was not disrupted by the sale.”
According to Vipin Bhatia, Australian Unity Bank head of finance – banking, Trail Homes won the tender based both on their competitive response, as well as the group’s confidence in their ability to facilitate the transaction efficiently.
“In Trail Homes’ experience, the multiple of the trail correlates directly with the strength of the business. As a guide, the average book sells between one and a half and two times the value of the trail - though this can be up to three times if the sale includes the business as a whole,” Young explained.
“The value of a trail book can be optimised through implementing retention-based activities focused on fully servicing clients’ current and future requirements. This high-touch approach builds the broker’s business by increasing the likelihood of referrals, and importantly helps offset the trail book’s natural attrition."
According to Young, brokers should consider their trail book a "living asset" which can be utilised to financially support the different stages of their businesses’ life cycle.
“A trail book sale, in whole or in part, can provide an immediate ‘self-funded’ cash injection that can be used to stimulate growth or alleviate working capital strain,” he said.
“Equally, how and when a trail book is sold upon exiting the industry is of paramount importance to ensure brokers optimise their earnings from both their book, and business as a whole. On this note, we recommend a carefully planned exit strategy, developed well in advance, and ideally done in collaboration with an accountant.
“This plan should be integrated with an overall retirement plan that supports long-term lifestyle goals. A core component of this process is to consider the handover phase, capturing the good will that has been built up in the business and the logistics of how clients will be transitioned to a new owner,” Young concluded.