Ladenburg Allocates Up To $70 Million For Follow-Up Securities America Payments

Monday, August 22, 2011 07:53
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Ladenburg Allocates Up To $70 Million For Follow-Up Securities America Payments

Tags: broker-dealers

A bit more detail is emerging on the Securities America sale, but the terms still seem on the "distressed" side.

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Ladenburg Thalmann has confirmed that it will add up to $70 million to its ultimate payout to Ameriprise for buying the broker-dealer.

 

The additional payments will reward Ameriprise if Securities America hits various revenue targets over the next two years.

 

Ladenburg will pay an extra 90% of all interest income Securities America generates above a certain level: $4.5 million next year and $6.5 million in 2013.

 

And it will cough up 21.5% of all gross revenue the firm generates above $440 million and below $520 million next year. Additional revenue beyond that point earns a reward of 18%.

 

In 2013, the gross revenue targets slide up to $475 million and $555 million.

 

Since Securities America was bringing in about $450 million a year as of the acquisition, the lower numbers should be easy enough to hit, but it is unlikely that the full $70 million will ever be paid.
 
Check my math, but it looks like the company will have to grow its revenue to exponential levels for Ameriprise to even seen $35 million of that money.
 
Be that as it may, the deal would still value Securities America at roughly 1/2 annual revenue at the highest payout -- not exactly the traditional three times revenue that the industry often figures is fair.
 

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