Cash and stock deal values the firm, with about 450 independent reps and advisers, at 39.4%, lower than other recent deals.
Ladenburg Thalmann Financial Services announced Monday that it had agreed to buy Securities Service Network Inc., known as SSN, which has close to 450 independent reps and advisers and produced $114.2 million in total revenue last year.
In a statement, Ladenburg Thalmann said it would pay $45 million for SSN, or 39.4% of annual revenue. The payment is split in two parts: $25 million in cash and $20 million in four-year notes. That valuation, while not as high as some of the recent offers by Nicholas Schorsch and RCS Capital Corp., is in the historic upper range for such deals.
SSN is currently owned by a trust, the David L. and Patricia B. Coffey Descendants Trust.
Following the completion of the SSN acquisition and other pending deals, Ladenburg Thalmann's network of independent broker-dealers will have about 4,000 advisers, $125 billion in client assets and annual revenues of almost $1.1 billion.
So far this year, the stock price of Ladenburg Thalmann has risen 16.6% and was trading at $3.65 on Monday morning. When the acquisition of SSN is completed, its chief executive, Wade Wilkinson, and other member of its management team will continue to operate the firm as a stand-alone business from its present headquarters in Knoxville, Tenn.
“This acquisition further underscores Ladenburg's commitment to the independent brokerage and advisory industry, which we believe is one of the sweet spots of the financial services industry,” said Ladenburg's chairman, Dr. Philip Frost, in a statement.
“Selling a broker-dealer for 30% to 40% of total revenues was considered the high end 10 or 15 years ago,” said Jonathan Henschen, an industry recruiter. “It's still a good price but there have been much higher prices and offers recently, particularly coming from RCAP.”
“But for these IBDs the lower price is worth it,” Mr. Henschen said. “They are left intact with no centralizing of back office functions. Ladenburg Thalmann leaves the broker-dealers alone. It has a track record to leave them alone.”
“That's invaluable for the firms considering them,” he said. “It also helps insure retention. And those IBDs linked to Ladenburg Thalmann have access to its investment banking deals and trust services.”
Mid-sized broker-dealers are typically characterized as firms with between 100 to 500 registered reps and advisers.
Ladenburg Thalmann's deal to buy SSN is the latest in a surge of such acquisitions over the past two months.
In July, LPL Financial said it had reached an agreement to buy the assets of independent broker-dealer Financial Telesis Inc., with 470 registered representatives.
In August, RCS Capital Corp., known by its ticker symbol RCAP, said it had agreed to buy two independent firms: Girard Securities Inc., with 250 reps and advisers, and VSR Financial Services Inc., with 264.
Prior to today's announcement, Ladenburg Thalmann has also been in the hunt for mid-sized firm. Last month, it said it was buying KMS Financial Services Inc., with 325 reps and advisers.
Also over the summer, one of Ladenburg Thalmann's subsidiary broker-dealers, Securities America Inc., said it was acquiring the assets of Sunset Financial Services Inc., which has 268 reps. The sales force of Sunset Financial consists primarily of insurance agents of Kansas City Life, according to the SEC filing. Kansas City Life was the former owner of Sunset Financial.
