LPL Financial (LPLA) Acquires National Planning Holdings
With an aim to expand scale and improve advisory services, LPL Financial Holdings Inc. LPLA has acquired the independent broker-dealer network of National Planning Holdings, Inc. Structured as an asset purchase, the transaction had an initial cost of $325 million, which LPL Financial paid using cash available for corporate use.
Transaction Structure
LPL Financial has planned to use two waves for onboarding the financial advisors and client assets of National Planning Holdings on to its own platform. The entire onboarding process is expected to be completed by the end of first-quarter 2018.
Once complete, LPL Financial is likely to make a contingent payment in the range of $0-$123 million, which will depend upon how much of National Planning’s business has been onboarded.
If less than 72% of business is onboarded, LPL Financial will make no payment. However, the payment will increase on an interpolated basis if the proportion of business onboarded ranges between 72% and 93.5%.
Financial Impact
The transaction is expected to generate $75-$100 million of run-rate earnings before interest, tax, depreciation and amortization (EBITDA) accretion by 2018 end.
Also, the company expects the deal to be accretive to its Non-GAAP earnings per share (EPS) by 40-55 cents. Further, it expects run-rate GAAP EPS accretion of 25-40 cents.
After considering staffing for onboarding advisors and clients of National Planning Holdings, transfer fees and account closure fees, and technology capacity investments, onboarding expenses are anticipated to be in the range of $40-$60 million.
Notably, LPL Financial has been extending its offerings to all affiliated advisors, which is expected to help the company gain greater market share.
The company’s price performance also seems encouraging. Its shares have gained 65.8% in a year’s time, outperforming the 34.7% rally for the industry it belongs to.
Currently, LPL Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the same space are E*TRADE Financial Corporation ETFC, Raymond James Financial, Inc. RJF and TD Ameritrade Holding Corporation AMTD.
E*TRADE Financial has witnessed an upward earnings estimate revision of 11.2% for the current year over the past 30 days. Its share price has surged nearly 60% in a year’s time. It currently sports a Zacks Rank #1.
Raymond James Financial’s earnings estimates for the current fiscal year have remained stable over the past 30 days. Its shares have gained 42.4% in the past 12 months. It carries a Zacks Rank #2 (Buy).
TD Ameritrade Holding also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of nearly 2.4% for the current fiscal year over the past 30 days. The stock has rallied 40% in a year.
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