After the close last night, brokerage and advisory firm LPL Financial (LPLA) announced that it is acquiring National Planning Holdings' broker-dealer network, significantly bolstering its market share. Even prior to this transaction, LPL Financial was the largest independent broker-dealer in the country with 14,000 advisers in its network. The news has shares trading higher by 4% to make new multi-year highs.
The acquisition is quite significant as the National Planning Network supports more than 3,200 advisers in the U.S., covering over 1.5 million customers. Its an affiliate of Jackson National Life Insurance, which is an indirect subsidiary of Prudential (PUK). From PUK's perspective, the transaction allows them to focus on its primary strategy, which is growing its retirement services business in the country.
LPLA will be paying an initial price of $325 million . However, that price could escalate to $448 million following the transition of NPH's financial advisers and clients to LPLA. As a leading broker-dealer, LPLA believes that the new clients and advisers coming on-board will benefit from its scale and breadth of services.
The transaction looks very positive from a financial point of view, too, as the estimated run-rate of GAAP EPS accretion is $0.25-$0.40 by the end of 2018. For EBITDA, the run-rate for accretion is projected to be $75-$100 million by the end of 2018.
Prior to this acquisition, LPLA had been on a nice run, supported by its steady, solid quarterly results. LPLA has exceeded analysts bottom line estimates for six straight quarters. However, generating topline growth has been a struggle as revenue has consistently declined on a year/year basis in recent quarters. This acquisition will give LPLA a shot in the arm in terms of sparking some growth.
All in all the transaction looks like a good fit, both strategically and financially for LPLA. Investors are certainly bullish on this transaction, illustrated by the pop to new highs. So, too, is SunTrust, which upgraded the stock to Buy from Hold this morning.