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Meet The Sage of Newcastle compounding at 40% CAGR. What?!

The Rule of 120

“Which IFA rollup to profile?” was the non-trivial question that we grappled with after releasing Part 1 of our UK Wealth series. After all, there are 40+ of them! 

After crunching the numbers, the conclusion became obvious: True Potential (TP). Founded in 2007 by David Harrison, this northern firm (it is headquartered in Newcastle upon Tyne) is the UK’s largest PE backed IFA consolidator. 

Few businesses can muster 40% growth, with or without M&A. TP has been compounding revenue and EBITDA by 40% over a 15-year period

Also, it is very, very profitable. 

In 2023, it generated $550K in EBITDA per FTE. This is more than double the levels of fund behemoths like Hargreaves Lansdown, Charles Schwab or Schroders; and miles ahead of direct competitors like Evelyn Partners. 

Wait, there’s more. 

TP’s growth accelerated at a time when many of its peers found themselves bogged down by technological, regulatory and cultural (read: integration related) setbacks. Since being acquired by Cinven for £2.6B ($3.3B) in early 2022, TP has doubled EBITDA to £250M (c.$310M). 

What’s going on? 

After all, TP’s playbook is hardly original: a fast paced, small ticket M&A strategy feeding a highly profitable, vertically integrated business model. 

Two factors set TP apart. One, consistent execution. Two, favourable industry backdrop. 

In this article we break down:

  1. TP’s business model - and why it is so profitable

  2. TP’s M&A blueprint

  3. The industry and regulatory backdrops that made it possible

  4. Cinven’s acquisition math and the resulting cap table

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