Norton Folgate, the small-ticket broker, remains undaunted by having to reject an all-share offer of £3.65m by an unnamed acquirer.

Robert Keep, who founded the company in 1996, says the reason for the sale is simply to raise capital, while he says the business itself is doing well.

“For Norton Folgate to achieve its corporate aims it requires additional funding,” he says. “This will be achieved either by organic growth or by a joint venture partner. We intend to grow the business anyway – so if a joint venture partner comes along, all well and good.”

In 2005 the company placed £28m of gross forward receivables in electronic point of sale (EPOS) systems, coaches, haulage, cars and contractors plant. Average deal sizes are £35,000 – a relatively high figure for an asset-finance brokerage. Following some four years of successive growth, the company became a plc in 2000 with all staff obtaining a shareholding.

Client base - Around half of Norton Folgate’s business comes from its existing client base, which now totals around 1,500. The company has written some business on its own book since 1999, but predominantly for deals that “make commercial sense but are difficult to place elsewhere”.

The company has some 20 established funders, including Lombard, Bank of Scotland and Kingston, and employs 10 sales and five management and administration staff.

The company bucks the trend in refusing to recruit from established national lenders. “It is not ethical to steal other companies’ staff,” says Keep. “We believe strongly in training our own people and adding to the long-term future of the industry in that way.”

Commenting on the broker market, Keep said: “We are margin driven as opposed to volume driven, service driven rather than document driven – and most important of all, we remain customer driven rather than risk driven.”

As a result, says Keep, brokers’ share of the asset-finance market has grown significantly in recent years as lenders increasingly take the view that broker business contains no more risk than direct business.

“It does not bring with it the cost of procurement that direct business does,” he says, “and is therefore potentially more profitable. Some finance companies have even gone so far as making their field forces redundant and relying on brokers for their new business growth. As a result, some of the largest finance sales forces in the UK belong to broker businesses.”

Keep, nevertheless, believes that there will always be space for brokers and direct funders to work side-by-side in the UK.

Mature - He stresses: “Our market is the most mature and the second-largest leasing market in the world. Of the top 100 UK companies, some 95 admit using leasing and asset finance to aid their capital equipment growth. Schools, hospitals and government buildings contain leased assets – and even public conveniences can be leased. This is a lasting benefit to lessors and brokers alike and actually adds to the credibility of the market.”

Keep forecasts several options for the future of UK lease broking. “Some finance companies and merchant banks wanting market entry are seeking to acquire brokers and thereby achieve business in good regular volumes. Also, some larger brokers are growing via a mixture of mergers, franchising and offering direct employment to their staff.”

“Virtually all brokers are now investing in infrastructure to maintain a competitive edge and deliver the highest standards of service. In this way brokers have become market drivers rather than market followers and, overall, are capable of developing sales channels not yet explored.

“At the same time they are building credible, profitable, scaleable and ultimately saleable businesses while shifting extraordinary volumes of funders’ money in a way that did not seem possible to anyone connected to the industry only a decade ago.”  

Reproduced with the kind permission of Leasing Life
 
Leasing Life Issue: 155 - August 06
Published for the web: August 1 06 15:11
Last Updated: March 9 09 12:26
www.leasinglife.co.uk