LPL Investment Holdings’ hunger to grow makes it a likely buyer of Investors Capital Holdings Ltd., a publicly traded independent broker-dealer that offered itself up for sale this month, analysts say. “You can be certain LPL has looked,” Charles Roame, Managing Principal of Tiburon Strategic Advisors, told Financial Planning.
LPL, already the industry’s largest broker dealer, has said that it would like to add 400 advisers per year, and buying Investors Capital, which offers 566 advisers, would serve that end. LPL has made five acquisitions in the last seven years, bringing its total affiliated representatives up to 12,000. The company has been growing organically at a fast clip as well.
Other possible suitors include Ameriprise Financial Inc., Cetera Financial Holdings Inc. and Ladenburg Thalmann Financial Services Inc. The management at Investors Capital might also bid for ownership. (All of the companies declined to comment).
Investors is a Pershing correspondent, making it an attractive buy for other Pershing correspondents, since integration would be relatively simple. On the down side, the firm tends to have smaller accounts. However, LPL might be able to outbid other buyers if it is cheaper to move Investors’ accounts to its own clearing house, Roame said.
In its SEC shelf registration, Investors Capital said that its chairman, Theodore E. “Ted” Charles, is proposing a sale of about 3.6 million shares of stock, asking for $5.28 a share, or close to $19 million. Charles, 68, owns 44.6% of the company, and family members and foundation control another 10%. He founded the company in 1995.
Investors’ fall is part of a long-term trend of consolidation in the industry. All firms with less than 1,000 reps are under pressure. “The number of mid-size firms has been declining for the past ten years,” Roame said. “Tougher compliance, advancing technology and other issues will bring even more pressure. In three to five years, there will be very few left,’ Gunn Allen Financial Inc., with 500 reps, and QA3 Financial Corp, with 400, shut down recently before a suitor could be found.
Investors Capital had $21.4 million in revenue and $345,674 in net income in the last quarter of 2010. In the last three quarters of the year, it reported a loss of $309,000.