Lonsdale Financial Group Ltd (Lonsdale) and Wrap Account Ltd (Wrap) will both add to DKN’s position as a major player in the Australian financial services market, the Baker & McKenzie team said. The acquisition will give it access to Lonsdale’s network of financial planning practices and over 250 financial advisers across Australia, as well as Wrap’s portfolio administration service business.

According to the lead Bakers partner on the deal, Richard Lustig, the deal had a number of interesting aspects for the lawyers involved. First, he said, it involved a doubling of the size of DKN.

But also, he told Lawyers Weekly, it “took the best part of a year to orchestrate”. He said that from the pre-planning stages to the actual implementation stage, about half that time involved pre-acquisitions structure and half involved implementation.

“The deal essentially involved the purchase of a financial planning business, where there are about 100 financial planning practises throughout Australia. And a critical thing in any successful merger and acquisition matter is maintaining the support of the people whose underlying businesses are being transferred across to the purchasing entity,” Lustig said.

Lustig said the deal also involved an interplay between three of four different aspects. “From a DKN perspective it involved a scheme of arrangement takeover of the Lonsdale financial group. It also involved the purchase of [Wrap]. The inter-conditionality of those two deals is relatively unusual because it meant that DKN needed to get shareholder approval as well as Lonsdale.

“It is relatively unusual for the acquirer to need to get shareholder approval to complete the deal. What was interesting here was that you had two expert reports. One at the Lonsdale level saying the arrangement was reasonable, and the second was from the Wrap level saying it was reasonable. This involved orchestrating a simulations and multi-faceted aspects or intertwining.

The Lonsdale acquisition was affected by two inter-conditional schemes of arrangement, being a scheme relating to Lonsdale ordinary shares and a scheme for Lonsdale redeemable preference shares known as practice shares.

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Lustig said: “So probably the most interesting feature around the transaction involved the creation of essentially a loyalty scheme whereby the holders of the financial planning practices were given an incentive to actively participate in the merged entity following the acquisition. So this involved some interesting structuring; a form of [DKN practice shares], a form of reward and loyalty system which operates for a two-year period following the completion of the deal. So in a sense I would regard that as one interesting or unusual aspect,” he said.

The consideration for the scheme involved the issue of DKN practice shares, which are converting shares designed to function as a loyalty arrangement, requiring ASX and shareholder approval, the firm said. Contractual arrangements were concluded with Zurich in respect of the simultaneous acquisition of Wrap, which was formerly owned by Zurich, and the marketing of Zurich products within the DKN network.

The Baker & McKenzie team advised on funding arrangements for the acquisition, which involved bank financing and a rights issue under the Corporations Act provisions, as well as dealing with counter offers for Lonsdale, mutual due diligence, two expert reports, shareholder approvals and a claim settlement.

Lustig said: “This has been an exciting and interesting project to work on over an extended period. I was fortunate to have the support of my talented and skilled colleagues who efficiently dealt with the challenges presented in this complex transaction. It has been a rewarding transaction for all concerned.”

Mallesons Stephen Jaques acted for Zurich in relation to the transaction, and Corrs Chambers Westgarth acted for Lonsdale.