Distressed Price For Securities America Ends The Suspense -- And Now Reps Can Make An Informed Choice
- Created: Thursday, 18 August 2011 05:07
The Ladenburg deal values the troubled firm at $150 million, which is barely 1/3 of its trailing 12-month revenue.
Initial response from Securities America reps I talked to has been guardedly optimistic. They knew Ladenburg was on the table as a possible buyer, but nobody suspected the total price tag would be so low.
In fact, former owner Ameriprise only considered Securities America to be worth $60 million once the firm pays an $80 million settlement to disgruntled clients and agrees to absorb the risk of additional litigation.
At that price, Ladenburg is effectively buying Securities America's 1,700 reps for about $35,000 apiece. That is maybe 13% of average annual production.
Compare that deep discount to the more traditional three times production that employees of Investors Capital were happy to pay a few weeks ago to buy out their old boss, Ted Charles.
Granted, the $150 million only represents the upfront portion of the deal. Ladenburg might also pay incentives if Securities America performs well over the next few years.
To do so, it will probably have to pay incentives to Securities America reps to stay. Many have been hanging around waiting to see what the retention bonuses will look like -- as yet, they haven't been announced.
Securities America lost about 100 advisors between January and May, the period when the firm's survival was in question and then Ameriprise started looking for a buyer.
Between May and now, the attrition accelerated, with another 100 advisors jumping ship.
On the positive side, Ladenburg promises that it will retain Amerprise's hands-off approach to running the company.
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