LPL, the biggest player in the game, has just sent strange signals to Cetera and the rest of the marketplace. At the very least, its decision to target “high-value” Cetera reps and not those at Advisor Group or some other rivals casts doubt on whether it is serious about acquiring the former firm, one investment banker says.
For Marron, the decision may be whether to go or whether to stay. At the moment, Lightyear Capital’s 83-year-old leader is sitting in the catbird’s seat. He has a highly successful track record and doesn’t have to do anything.
But Marron has been doing deals on Wall Street since the 1960s and he's proven he can play his hand as well as anyone. He was once considered a boy wonder on Wall Street; he started his own brokerage firm at 25 and then became president of Mitchell Hutchins at 33. Later he merged Mitchell Hutchins with PaineWebber, which he ran for decades. As a firm known for its equity research, sales and trading skills, PaineWebber was viewed as one of the few large Wall Street firms where research possessed a high degree of integrity because it was not subordinated to the higher margin investment banking business.
If Marron buys Cetera, the combined entity would have about 12,000 reps and become a major rival to LPL. Some think that outcome is precisely the one LPL wants to avoid.
Were Marron to make a deal with LPL, he would be a legend in the private equity business and the “go-to guy” for potential investors and top talent in the IBD world. He reportedly negotiated the deal to sell Cetera to the hard-charging Schorsch in less than a month.
As for LPL, its desire is to warn other B-Ds that recruiting its reps is fair game, but “spiking the football and dancing in the end zone is another matter,” as one recruiter says. That may explain why it singled out Kestra, he adds.
Fair or not, LPL executives apparently perceived Kestra as one of a handful of midsize firms that was aggresively public about recruiting NPH reps. Given that it is owned by a cost-conscious private equity firm, recruiters think it might have set an example for LPL to scare numerous other midsize firms.
But the bigger question is how the Cetera saga plays out and whether it could turn into a game of 3D chess.