Australia’s financial advice and wealth management industry accounts a friendly merger between the Snowball Group and the Shadforth Financial Group.

According to The Australian, the deal, described as a "transformational merger", will see two vertically integrated financial advice groups create an enlarged wealth management business with more than $14.3 billion in funds under advice, administration and management.

Tony McDonald, Snowball’s managing director, said "Our balance sheet, particularly with the strength of the Shadforth balance sheet coming and cash they have on their balance sheet, puts us in a unique place to really drive sensible, mature, non-knee jerk reaction selective consolidation in the industry going forward."

Shadforths chief executive Tony Fenning added the unification would enable the combined group to take advantage of consolidation opportunities.

"We think that the way that things have panned out with the consolidation you've really got a small number of very big players who are just enormous and find it hard to focus on the advice business because they have so many other businesses… Then you've still got the small operators and we want to position ourselves as someone advisers can attach themselves to with the entire infrastructure to compete against the big guys," Fenning explained.

The Investor Daily reported that under the terms of the all-script takeover offer, 2.15 Snowball shares will be offered for each Shadforth share, resulting in the issue of about 515.7 million new Snowball shares.

Shadforth shareholders will own 71 per cent of the merged entity upon completion.

Snowball's shares surge more than 11.5 per cent to 38.5c because of the rampant news of the merger which is expected to be 68 per cent EPS dilutive to Snowball shareholders in FY12 (before one-off transaction and integration costs).

By 2012, the parties expect to achieve moderate cost and migration synergies growing to $5 million towards the following year.

With Snowball executive Tony McDonald as the merged entity’s chief executive; all present directors of both companies shall retain their posts. Snowball chair Mr Dodd is its future chairman while Shadforth chair Sam Gannon becomes its deputy chairman.