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Why Lightyear Founder OK'd Cetera Sale

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Beginning several months ago, RCS Capital Chairman Nicholas Schorsch paid a string of visits to Donald Marron, the founder of private equity firm Lightyear Capital.

The meetings were casual, informational, Marron says, and mentioned Cetera Financial Group -- one of Lightyear's holdings -- only by inference.

“It was really just to come and say hello and to say what he was doing in the business,” Marron recalls of Schorsch, who spent much of last year buying up multiple independent broker-dealers in a well-publicized acquisition tear.

As of last year, Marron says, Lightyear wasn’t looking to do a deal for Cetera, which it had created Cetera in 2010 when it acquired four independent broker dealers from ING. Cetera had just picked up two smaller IBDs from MetLife in the spring -- “and we had more acquisition opportunities, possibly,” Marron says.

“The company was growing well. The markets were growing well," he adds. "We had $75 billion in assets under administration back then [in 2010]; it’s now $145 billion.”

Then, a month ago, Schorsch made the proverbial offer the Lightyear team couldn’t refuse. “He said he’d like to make a preemptive bid, which is great because then you don’t have to go through an auction,” Marron says. “He gave his vision of what he wanted to do with Cetera as a central part of [the holding group, also known as RCAP] and [said] the whole management team would remain in place.”


That promise proved key.

Back in 2000 when Marron was chairman and CEO of Paine Webber Group, he orchestrated its sale to UBS for $11 billion. A linchpin of that deal was UBS’ promise to keep Paine Webber’s management in place after the purchase. Marron, who had served as chairman and CEO of Paine Webber for 20 years, became chairman of UBS America for three years following the sale.

With that perspective, Marron believed the RCAP deal offered as little disruption as possible to Cetera’s operations, which now include 6,600 advisors.

Cetera CEO “Valerie Brown has done a great job in building a very good and solid firm," Marron says, "and Nick could see that. We thought if we could get a good price and we keep the same management, then it’s going to be good not only for the shareholders and employees and management, but the client, too.”

The deal, announced Thursday, proceeded quickly. A spokesman for Lightyear, Ryan Stepanian, says the firm expects to close the sale by June.

Although many Cetera insiders were unaware of the negotiations before the deal was announced, Marron says he told Brown of the discussions at an early stage.

“Valerie is aware of every conversation we have had or anyone else who came in to talk with us,” he says.

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