LPL Investment Holdings Inc., registered with the SEC for an initial public offering (IPO), on June 4, nearly five years after the firm sold about 60% of itself to two private equity investors.
Nearly five years ago, when LPL monetized its owners’ stakes by selling a majority interest (about 60% at the time) to private equity firms Hellman & Friedman LLC and TPG Capital, the long-term plan was to eventually go public. At that point, the deal valued the firm at $2.5 billion. Since then there have been a series of acquisitions, lifting the number of advisors to about 12,000 financial advisors who are broker/dealer representatives, investment advisors and insurance agents–often, all three. Plus the firm says it provides “support to over 4,000 additional financial advisors who are affiliated and licensed with insurance companies,” making it one of the largest distributors of investment and insurance products in the U.S. “Since 2000, we have grown our net revenues at a 15% compound annual growth rate (CAGR),” according to LPL’s preliminary prospectus.
Like a wirehouse, the firm’s distribution capability is immense, but unlike a wirehouse, the firm does no investment banking, “product manufacturing, underwriting or market making.” LPL states that “revenue stems from diverse sources, including commission and advisory fees as well as fees from product manufacturers, recordkeeping and cash sweep balances.” With the kind of distribution the firm commands, revenues from manufacturers for product shelf space could be substantial.
The firm’s filing looks like it will raise about $600 million. They list debt at $1.4 billion. As of March 31 their debt-to-asset ratio for the quarter was 42%.