For Barry Lambert FCPA, necessity has been the mother of invention. The founder-chairman of the accountant-driven financial advisory firm Count Financial came from humble beginnings and, in the early years of his career, struggled to afford three meals a day. It was while moonlighting from his job with the Commonwealth Bank of Australia (CBA) that Lambert, then qualified as a CPA, had the inspiration for expanding accountancy work into financial services provision.
This led him to go it alone, setting up Count Financial in 1980 and building it into Australia’s largest, independently owned, franchised network of financial planners and wealth accountants.
Having spurned many offers over the years, at the end of last year Lambert finally relinquished control of his baby when he and fellow shareholders decided the time was right and sold to CBA for A$373 million.
The CBA offer came out of the blue in August last year, Lambert says. “My old employer approached us and said: ‘We won’t make a hostile bid, but we’d like to buy. What will make you happy?’.”
The bank was scouting for potential takeovers to boost its wealth management advisory business, which sits alongside Colonial First State. But Lambert hadn’t been considering a sale. In fact, his new venture Countplus, listed in December 2010 and essentially a listing service accessing equity for business and accounting advisers was busily acquiring accountancy firms.
"I never expected to sell to CBA,” Lambert says. “Maybe if it had been one or two of the other banks I wouldn’t have sold it for them to rape and pillage, whereas I know Commonwealth will respect what I’ve built up.”
What made Lambert change his mind? After all, in an April 2010 interview with InvestorDaily he was quoted as saying: “I believe one of our great attributes is that we’re independent of institutions and … our advisers understand that.”
Lambert points to the obvious first of all volatile market conditions and the resulting subdued industry fund flows. “The GFC [global financial crisis] was a factor, but you can handle the ups and downs of the market,” he says. A more pressing reason was the new financial advice regulations taking effect this year, which appeared to make it harder for mid-sized firms such as Count and was fuelling consolidation.
“We started to lose staff to larger organisations,” Lambert says. “Four senior executives [including chief executive officer Marianne Perkovic] went to Colonial.” He admits the company had also been “kicking a few own goals”, trying logistical changes to refresh the business that, in hindsight, he feels weren’t well timed.
In the early days I wouldn’t pay myself so I could reinvest back into the business, and that’s what I did. There was never any Big Brother looking over my shoulder. Barry Lambert
Not only was it the right moment to sell, but also the right buyer offering the right deal one that would allow Count to keep operating as a stand-alone company under the umbrella of the wealth management division of Commonwealth and Colonial products. As the agreement stands, Count keeps its own board and CEO with Lambert, now 65, continuing as non-executive chairman.
“What changes is the ownership of the service company, Count,” Lambert stresses. “CBA hasn’t bought the accountants. If CBA does something stupid, the franchisees can walk.” It’s not something he expects: quite the reverse. He believes the banking-type services can only help support accountants in becoming more successful.
In some respects Lambert might be seen as coming home. The trust between the two companies is based on a relationship dating back to 1964, when Lambert began his career in the finance division at CBA at 17. As he has been a shareholder in the bank for many years and has close ties with some of the major players, he says there wasn’t a lot of due diligence necessary.
Reassurance, he insists, comes from CBA being Australia’s largest bank and one of the most highly rated in the world, as well as the quasi-protection offered by the Reserve Bank of Australia that has gone out of its way to ensure banks remain prosperous.
CBA is already a platform provider and corporate lender to Count. “It understands our culture and wants to maintain Count as an accountant-based business and to invest in the future of the brand,” Lambert says.
He believes the deal was secured less through negotiating skills than by the fact that Count has been built up as a unique business, which the bank wanted to buy.
“We had a distinct culture, a distinct accountant-based business, and that was the most important part of the equation. If you look like everyone else you’ve got to compete with everyone else, but when you’re different you don’t have to compete,” Lambert says, attributing this idea in part to a book he read many years ago by Edward de Bono (Sur/petition: Going Beyond Competition, HarperBusiness.) “De Bono coined the word ‘surpetition’ to describe positioning yourself so that your clients don’t think you have a competitor. That’s the strategy I still take.”
Although CBA, seeking to expand its stake in the lucrative and growing self-managed super funds market, was keen to buy, a price had to be agreed and Lambert says there was consensus among directors and their advisers at JP Morgan that the CBA offer was a fair one. “Obviously, in negotiations you always say it isn’t enough. What happened was that we got them [to raise it] a little bit. Then when they did due diligence they could see we had kicked a few own goals, and took fright a bit and pulled their offer back down. So in the end, their offer was very close to the original.”
Lambert had turned away two serious offers to buy Count in 1989: one for A$135 million and another for A$150 million. Preferring to maintain his independence, he chose to list the company in December 2000, selling 40 per cent of the business in shares at A40 cents plus 20 million options at A40 cents, giving staff and member firms an opportunity to own equity.
“I’ve always had a slightly left-of-centre viewpoint; I believe in workplace participation and workplace ownership,” Lambert says. “The network of accountancy businesses was delivering value to the company and I wanted to reward them and the staff. I remember having a meeting with the staff some time before and saying, ‘I want you all to think and act like owners because one day you will be owners’.”
That tendency to think big was something that seems to have come naturally to Lambert. In the late 1970s, when he was working for the Commonwealth Bank Finance Corporation, he asked for permission to take on an extra job doing tax returns at night to pay his mortgage.
The demand was so great that Lambert began to farm out work to other accountants and a network started to grow. Approached by life insurance agents and property salespeople wanting him to sell their products, forward-thinking Lambert instead looked into the possibility of accountants doing that themselves and applied for a dealer’s licence. “I wanted to convince accountants they should be looking at a client’s total affairs, taking a holistic approach, not just providing accounting and tax services.”
After that, Lambert never looked back. For 31 years the company has posted profits despite market fluctuations. For 2010-11, the company reported a 113 per cent increase in net profit. Excluding the one-off investment and listing of Countplus, profit was still up a respectable 6 per cent.
Lambert says this track record has been about common sense. “Looking back, I wouldn’t do business that didn’t make sense. I wanted to be a service provider. In the early days I wouldn’t pay myself so I could reinvest back into the business, and that’s what I did. There was never any Big Brother looking over my shoulder. Competitors who were funded by some life company, for example, had fancy offices or flash cars, but the first time there was a downturn they would be out of business.”
Looking to the future, Lambert is convinced the CBA deal represents a secure and dynamic future for Count: maintaining its distinctiveness while drawing on the resources of, if not a Big Brother exactly, a paternalistic aristocrat.
“You know, Count derived from the word accountant,” he says. “I was searching for a name and I looked it up in the dictionary. It meant ‘aristocrat’ and ‘numbers’ and I wanted to be the company that was the aristocrat of financial advice.” Lambert says he will keep a close eye on how well CBA treats one of its most prominent citizens.
The deal in detail
- The Commonwealth Bank of Australia (CBA) paid A$373 million for Count Financial.
- The transaction offered Count shareholders A$1.40 cash or $1.40 worth of new CBA shares (plus the 4 per cent dividend declared by Count). Directors unanimously recommended the deal to shareholders, whose votes were overwhelmingly in favour of the sale. Only 69 shareholders, or 1.1 million of the total 182 million votes, were cast against the takeover.
- CBA takes on Count Financial as a standalone business, with Count’s 630 aligned financial planners remaining independent of the bank’s other wealth management distribution.
- Countplus continues as an independent body with CBA owning 38 per cent.
- Count Financial’s 17 per cent stake in home loan broker Mortgage Choice is also consumed by CBA.
- Barry Lambert collected nearly A$75 million through his 17.8 per cent direct holding in Count. The Lambert family also previously held 20 per cent.