Ann: Sale of Corporate Trust business, page-3

Any ideas how they got 50mil for a business bringing in 1.1mil profit?

@Just_a_guy

I don’t really know. But, if I had to take a guess, I’d say this is a business where substantial synergies can be easily achieved by eliminating duplicate fixed costs.

If you look for instance at the last couple of years of IFL’s Trustee Services results, UNPAT ran at ~25% of Gross Margin; that is, 1.1m$ UNPAT would correspond to roughly 4.4m$ GM. If the associated Operating Expenditure can be removed altogether, that would give 0.7*4.4m$ = 3.1m$ of profit after tax.

Thus, a purchase price of 51.6m$ would imply an effective PE multiple of 51.6m$/3.1m$ = 16.6, which isn’t exactly cheap, but not unreasonable either for a low-risk business such as Corporate Trustees.

Also any thoughts on why ‘corporate’ trustees services would be any less core than other trustee services?

As to why this business is not seen as "core" by IFL's Management, I guess it is because it doesn’t lend itself to an interplay with Financial Advice and Investment Management in the same way as the Private Trustee Services business does, but I may be wrong.

Some colourful background behind the buyer, by the way, have a look here:

https://www.copyright link/business...iels-secret-aussie-super-play-20170410-gvhqi0

Anyway, overall it does look like a good deal to me, from IFL's perspective.

Cheers