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Cetera, LPL, Ladenburg Losing Appetite for M&A, Their Execs Say

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Some broker-dealers are on a diet, their executives say, and have little appetite for acquisitions in 2015.

“We have announced 11 acquisitions in 15 months, and I may not eat ever again,” said Cetera Financial Group President Adam Antoniades, alluding to the wining and dining involved in the M&A process.

Antoniades spoke during a general session late Tuesday at OneVoice 2015, the yearly conference hosted by the Financial Services Institute, which he currently chairs. (He filled in for Michael Weil, CEO of Cetera’s parent company, RCS Capital (RCAP).)

Still, the executive shared what the group continues to look for in potential partners. “There’s got to be a strategic fit, and you’ve got to be able to scale quickly,” he explained, adding that Cetera includes roughly 9,800 independent reps.

“We all have a lot more in common than we have different,” said Robert Moore of LPL Financial (LPLA), which has some 14,000 affiliated advisors.

LPL gobbled up multiple independent broker-dealers between 2003 and 2007. Since then, it has generally limited itself to acquiring firms that add to its platform of products and services for advisors.

“If we find specific entities we are interested in, we will let it be known,” Moore explained, referring to the firm’s current strategy as focused on “capabilities build-out.”

Richard Lampen, CEO and president of Ladenburg Thalmann (LTS), stressed the upbeat outlook of those in the independent-advice industry. “We all share a belief in the growth and potential of IBDs and the advice business,” he said.

Ladenburg Thalmann, which ramped up an acquisition spree around the time that LPL slowed down, acquired Securities America in 2011 from Ameriprise Financial (AMP). It just wrapped up its purchase of Securities Service Network, which includes 450 reps, and recently bought KMS Financial Service, with 325 advisors, as well.

“KMS and Securities Services Network have management that is simpatico with us and to partner with us,” Lampen said. The firm now includes roughly 4,000 advisors.

Frothy Prices

Moore notes that one reason LPL has been keeping away from the M&A banquet in recent years is pricing. “In 2010, that was an expensive time in the market,” he stated. The firm also has been concerned with attrition.

“We did a 65%-of-revenue deal, and now deals are at parity,” Moore said. “That’s a big bar to get over compared to organic growth.”

Lampen says Ladenburg Thalmann has “been fairly generous” in what it’s paid recently for IBDs. “Multiples have increased,” he explained. But the firm also looks at other figures, of course, like multiples of cash flow and earnings before interest, taxes, depreciation and amortization (EBITDA).

“These are great acquisitions, and we are paying full, fair but reasonable prices that are not too out of line from what we have done in past,” the executive explained.

Hard to Swallow

Moore didn’t shy away from sharing the pros and cons of the M&A process. “The acquisitions mean we have picked up some great talent that impacts our business today. Integration issues are never to be taken lightly…and can represent a distraction from your core priorities,” he explained.

(In 2007, LPL Financial had a series of well-publicized technical problems with its platform, which it said concerned changes being made to its system as the Pacific Life broker-dealers were being ingested).

“This is why we moved our focus to capabilities, and we did most acquisitions” before the financial crisis,” Moore said. “Four to five years out, it’s good to do a post-completion, post-mortem review — dust off the assumptions and validate if it was or was not a good deal. We have by and large said ‘yes.’ ”

Cetera isn’t ready for that process, according to Antoniades. “We are still in class.”

Ladenburg Thalmann’s chief says its integrated IT system — or “super-platform” — is being rolled out this year across its IBD network.

Though tech troubles could change his mind, of course, Lampen is optimistic for the moment. “In due course, we could add a new acquisition to that,” he said.

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