Thomas Heald has 26 financial advisers and mortgage staff and more than 1,100 clients in Yorkshire and the East Midlands.
AFH says the deal takes its funds under management to more than £3.5 billion and the takeover is one of its biggest to date. AFH has acquired 11 firms in the 12 months.
Nick Thomas and Nick Heald founded Thomas Heald in 2009 and it is one of the largest independently-owned corporate-charted practices in Yorkshire.
Mr Thomas said: “This is a great deal for our clients, who will receive the same service, delivered by the same advisers and staff, but with the added advantage of AFH’s back-office support and investment expertise. It’s also great news for our advisers, for whom all that support means more time to do what they enjoy – helping clients.
“We’ve been approached many times by people looking to buy Thomas Heald but we’ve never met anyone who we felt comfortable doing business with.
“To us our client proposition is of paramount importance, and with AFH we’ve found people who see things the same way. Reducing – and now scrapping – platform fees, making investing more accessible, always looking to improve the outcomes for our clients: AFH and we are a great fit.”
The deal is one of AFH’s biggest to date and means the group now has more than 180 advisers covering the UK.
Under the terms of the deal, the maximum purchase price of Thomas Heald will be £5.1m depending on performance. During the year ended 31 March 2018 the business reported a pre-tax profit of £365,000. However, on a pro-forma forward facing basis the EBITDA of the business is £1m with "targeted profitability" of £1.25m.
The initial consideration for the acquisition is £2.3m in cash, funded from AFH's existing cash resources. Further deferred consideration will be payable in cash over the next 26 months, subject to performance criteria being achieved.
AFH chief executive and Chartered Financial Planner Alan Hudson said: “This is a very significant deal for AFH, both in terms of strengthening our presence in an important part of the country and the growth of our adviser force.
“It’s also another step on our way to achieving our target of £5 billion funds under management.”
• Editor's Note: Story updated at 9 am to add more details of financial aspects of the deal.