A deal which would have seen IFA Lighthouse Group purchase upward of 200 of Network Data's appointed representatives (ARs) collapsed because the latter's bank declined its permission.
A source close to the deal, which would also have included some of Network Data's recurring revenue, told IFAonline the bank, understood to be the firm's chief creditor Halifax Bank of Scotland Corporate, is "waiting for a better offer".
"I know teams on both sides worked very hard to try to get the advisers across but they just couldn't get past the bank," the spokesperson says.
In a stock exchange announcement this afternoon, Lighthouse Group said it is discontinuing all discussions with the board of Network Data concerning the potential transaction.
Latest reports suggest Network Data has been suspended from AIM following the collapse of the deal.
The source said around 200 of Network Data's 400 plus ARs had expressed an interest in moving across to Lighthouse Group, adding a large portion of the remaining would likely have followed soon after.
Talks began following a decision by the FSA last month to withdraw Network Data's permissions to carry out regulated activities. It left hundreds of advisers unable to trade.
In an email sent out to Network Data and MBSL ARs, Alex Cotton chief executive officer at MBSL, confirmed that matters had not reached a conclusion despite the proposal made by Lighthouse Group.
"Naturally we are exasperated and extremely disappointed at this turn of events which impacts on you and the network's staff, including ourselves.
"This decision is a complete shock to ourselves and we confirm that all the hard work we put in with you last week was done in good faith."
Cotton said that an alternative solution had been proposed and it was waiting on details before contacting ARs.
Lighthouse executive chairman David Hickey said in the stock exchange announcement earlier today: "The Board of Lighthouse would like to thank the board of Network Data and their colleagues for the professional way in which the potential transaction was approached by them, and regrets that the necessary arrangements to conclude within the stipulated timeframe were not implemented,"
A spokesperson for HBOS declined to comment.
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