A merger of the five Ladenburg Thalmann independent broker-dealers (IBDs) with Advisor Group would create the IBD industry’s third-largest player with about $3 billion in revenues. Earlier this year, a majority interest in Advisor Group was acquired by private equity firm Reverence Capital in a transaction that valued it  at more than $2 billion.

Three days after news broke that Ladenburg Thalmann was exploring the potential sale of the IBD network, Bloomberg News and other sources reported that Ladenburg was engaged in exclusive talks with Advisor Group and Reverence Capital. One investment banker said that if talks between the two IBD networks proceeded on schedule a transaction could be announced by the end of the month.

All this begs the question of what a combination of the two networks would look like. Advisor Group As an entity that would rank behind LPL Financial and Ameriprise in terms of revenues and just ahead of Raymond James Financial Services.

Advisor Group’s four IBDs—Royal Alliance, SagePoint Financial, Woodbury Financial Services and FSC Securities—generate about $1.7 billion in revenues. In contrast, Ladenburg’s five IBDs—Securities America, Triad Advisors, Securities Service Network, KMS Financial Services and Investacorp—produced about $1.2 billion in annual revenues last year.

Given Advisor Group’s greater overall revenues and Ladenburg’s desire to sell itself, it would appear Advisor Group is in the driver’s seat. With the exception of Ladenburg’s Securities America unit, the Advisor Group IBDs tend to be somewhat larger, particularly in rep count, than Advisor Group’s.

However, Securities America would be the single largest business unit within a potential combined entity. In 2018, its 2,600 reps generated $803.5 million in revenues for an average of $314,000 per rep.

Omaha, Neb.-based Securities America grew more than 25 percent in 2018 and it was believed to be the single largest beneficiary of the fallout from LPL Financial's acquisition of National Planning Holdings (NPH) in 2017. Many NPH reps opted not affiliate with LPL, sparking a recruiting war.

Other IBD executives noted that Securities America had historically offered reps a wide degree of latitude and independence, factors that appealed to NPH reps. In light of this, and the fact that it would be the largest business unit among a combined entity, they added it was unlikely that Securities America would be merged into another broker-dealer.

These executives also observed that Triad Advisors, a Ladenburg firm that targets younger hybrid advisors and clients, also was likely to remain independent. The same probably was the case with Securities Service Network, a third Ladenburg firm with a number of CPAs and other high-producing reps. For a variety of reasons, IBDs with lots of CPAs tend to be more profitable.

Ultimately, for any transaction to be successful, both parties would need to work together and coordinate the transition to minimize any potential breakage, or departures of existing reps. One rival IBD executive credited Advisor Group with managing the transition of its acquisition of Signator Financial from John Hancock in 2018.

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