Securities America, the beleaguered subsidiary of Ameriprise Financial Inc., has found a new home.
The independent broker-dealer with its roughly 1700 financial advisers was sold to Ladenburg Thalmann Financial Services Inc. for $150 million —
an acquisition predicted by InvestmentNews in July. Additional payments may be made if the B-D meets certain performance targets. Those targets were not disclosed by Ladenburg, a publicly traded company which is best known for its investment banking and capital markets operations.
“This is a transformational acquisition for us,” said Ladenburg chief executive Richard Lampen. “We're committed to the independent-broker-dealer space, and this transaction now gives us approximately 2700 advisers with $70 billion in assets under management and an annual revenue run rate of between $650 million and $675 million.”
The market appeared to like the deal, as well. Ladenburg's share price was up 3.3% on a day when stocks were in red numbers most of the time. Meanwhile, Standard & Poor's maintained its buy rating for Ameriprise after the deal was announced.
Securities America chief executive Jim Nagengast, who has struggled to retain the firm's top producers since Ameriprise put the firm on the block in April, gushed about the deal. “We've achieved everything we hoped to without any disruption to our advisers and their day-to-day operations,” said Mr. Nagengast, who will continue to operate the firm as a stand-alone business. “We've found a partner committed to the independent-broker-dealer space and committed to our advisers and employees.”
Based on a number of e-mails he has received, Mr. Nagengast said the brokerage force likes the deal. “I think this is a great fit and I think our advisers will be happy with the news. I expect to retain our advisers.” He will be conducting conference calls with the firm's brokers over the next two days.
Just in case, Mr. Lampen and Mr. Nagengast said that Ameriprise and Ladenburg have established a retention package that “we think will be effective.” They provided no details on the package. The acquisition is expected to close by the end of the year.
For Ladenburg, the deal is an inspired piece of business, said Timothy Hurley, managing director of boutique investment bank Bentley Associates LP “It's basically a mass hiring and they're getting 1700 brokers for $88,000 each. Under the circumstances, I wouldn't say that's cheap, but it's not bad.”
Certainly, the deal — and the approval earlier this month of an $80 million settlement of an investor class action suit — allows Securities America to close the book on an ugly chapter in its history. The class action stemmed from sales by Securities America brokers of private placements issued by Medical Capital Holdings Inc. and Provident Royalties LLC, which ultimately produced $400 million in losses. Ameriprise, which put the firm up for sale after the extent of the losses came to light, will cover the costs of the settlement as it did with an earlier deal to settle individual investor claims.
“The news is positive, and it's good there is some finality to this as a lot of people were leaving” said Andrew Oster, president of Oster Financial Group LLC, a member firm of Securities America. “We'll review this deal to see if it makes sense for us.”
Mr. Oster said that Ladenburg Thalmann was one of the preferred buyers on his short list of potential acquirers. He's still looking for some assurances from Ladenburg that Securities America will continue to be run independently. “I want to remain independent,” said Mr. Oster. “What happens if down the road Ladenburg thinks it's more cost-effective to roll their broker-dealers together?”
Ladenburg Thalmann has acquired Investacorp Inc. and Triad Advisors Inc. in the last four years. Both firms continue to be run independently.
(See how Securities America's rep count and comp compares to Investacorp and Triad.)
Mr. Lampen said he plans to let Mr. Nagengast and his executive team continue to call the shots. “The success of our prior two acquisitions was based on their remaining independent,” he said. “That is also the case here with Securities America.”
Donald Patrick, president of Integrated Financial Group and a top producer at Securities America before moving his 50-broker team to LPL Financial LLP in August, offered up a mixed reaction to the news of the deal.
"This is about as good a deal as they [Securities America advisers] could have expected,” he said. “I imagine there won't be a lot of change for them and they can probably expect some stay bonuses."
But the former Securities America rep said he has no regrets about leaving for LPL. "A big part of our motivation for leaving was financial strength. Ladenburg Thalmann is tiny and it would make me uncomfortable."
Nevertheless, in a market environment suddenly looking a lot more difficult for brokerage firms, the Ladenburg deal is probably as good an outcome as Securities America advisers could have hoped for, Mr. Hurley said.
“This looks like a happy ending to the saga,” he said. “Securities America advisers are ending up in better place.”
