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Yellow Brick Road on the hunt for partners

Mark Bouris’ Yellow Brick Road (ASX:YBR) is on the lookout for partners in the financial planning space according to media reports.

The Australian Financial Review (AFR) reported today that Macquarie Group (ASX:MQG) and BRW Rich List member Chris Ellison bought $7 million and $3 million worth of shares respectively in a share placement.

Yellow Brick Road is reportedly now sitting on $18 million in cash, and could be looking to deploy some of its cash in the near future. The AFR reports that Yellow Brick Road founder, TV personality and financial services entrepreneur Mark Bouris is looking at small financial planning firms or wrap platform businesses. Potential partners could include Centric Wealth, Mortgage Choice Limited (ASX:MOC), Dixon Advisory and Matrix Planning Solutions, says the newspaper.

At the same time, Yellow Brick Road could also be a target of some of the smaller banks or building societies, looking to expand their businesses. Mergers and acquisitions have been rife in the financial services sector for some time, with the Commonwealth Bank (ASX:CBA) buying Count Financial in 2011, as well as taking over Aussie Home Loans, while IOOF Holdings (ASX:IFL) acquired Plan B in 2012.

Yellow Brick Road, which has the backing of Macquarie Group, has been aggressively expanding its business recently, offering to undercut the big four banks on home loans by a wide margin. It has also been seen as a move by Macquarie to diversify its business away from its traditional investment banking operations, which have suffered in weak markets since the Global Financial Crisis.

Foolish takeaway

After the success of Mr Bouris’ previous financial services business, Wizard Home Loans (which was snapped up by GE Money for an estimated $500 million), Yellow Brick Road could be heading down the same path.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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