Speaking from Dubai this afternoon, he said: “There have been market rumours that there was a poor management team in place, but we back the management team fully.
“Home of Choice is a very good business – the problems they faced were to do with an inappropriate capital structure, not poor management.”
LSL Property Services confirmed it had purchased the assets of Home of Choice from administrators for £1.5m today. And Embley says the network will continue “business as usual” though it will now trade as First Complete under LSL’s authorisation from the FSA.
LSL’s acquisition received fierce criticism from market commentators last week, with some suggesting that the incumbent management team at Home of Choice had personal incentive to agree to LSL’s bid over a rival offer from The Money Group.
LSL’s bid backed Home of Choice’s existing management, chief executive Gerry O’Brien, executive deputy chairman Richard Coulson and chairman Keith Baldwin.
Embley said that before buying any business LSL looks at the paperwork “quite forensically” and that all networks required huge investment to grow to the size that Home of Choice was, at 550 UK based advisers.
Cost of servicing
Embley said the reason Home of Choice went into administration was “because of the cost of servicing the £6m worth of debt on its balance sheet” - the the cost of growing the network. The cost to service this debt was £500,000 a year.
He added: “If you break down the numbers, Home of Choice only lost £100,000 last year. If you take away the cost of servicing that debt, they actually made money.
“The acquisition means that First Complete is now operating with equity on its balance sheet.”
First Complete will make money
Embley is confident that the business will make money this year, and he says there is cash available for network members to invest in improving their own firms.
LSL has approved O’Brien’s business plan for this year, which includes a strategy of cross-selling and penetration into markets including protection and general insurance.
Linear Financial Solutions, another mortgage network owned by LSL Property Services, recently adopted a similar strategy of increasing market penetration rates.
Embley is keen to reassure brokers of LSL’s commitment to advisers in the network, and says he plans to offer future investment in member firms.
He said: “Clearly we value the existing business and we need to maintain loyalty from Home of Choice’s adviser network. The first steps we’re taking to earn that loyalty include honouring the debts owed to advisers and we have committed to paying nearly £1m of back commission to brokers, as well as honouring pipeline business already submitted.”
Contract terms
LSL is also honouring advisers’ existing contract terms, and said that confusion about notice periods was “market rumour”. Notice periods for all brokers in the new First Complete network will be under the same terms as Home of Choice contracts.
The next steps for First Complete include further investment. Embley said that Home of Choice has “high quality firms” on board and added “we clearly have capital” to help individual firms improve their businesses.
He said meetings last week with some advisers suggested that firms were looking for funding to improve point of sale systems, and that said he welcomes discussions with all brokers wanting to grow their businesses and improve their offerings.
LSL also owns Your Move and Reeds Rains estate agencies, which collectively operate 350 financial advisers across Britain.
