Big indie deal finally comes off

NEW YORK — After eight months of negotiations, LPL Financial Services Inc. last Thursday finalized the details of its acquisition of three broker-dealers owned by Pacific Life Insurance Co. of Newport Beach, Calif.
The deal involves 2,200 registered representatives and advisers — the bulk of Pacific Life’s sales force — who generate $350 million in revenue, clearly establishing Linsco/ Private Ledger Corp. as the dominant independent-contractor broker in the industry. The financial details of the deal were not disclosed.
Linsco expects to have 9,900 registered representatives affiliated with the firm in a variety of channels.
The acquisition of the three Pacific Life broker-dealers — Mutual Service Corp. of West Palm Beach, Fla., Associated Financial Group of Los Angeles and Waterstone Financial Group of Itasca, Ill. — has been one of the most hotly contested issues recently in the industry.
Three other Pacific Life broker-dealers — United Planners’ Financial Services of America in Scottsdale, Ariz., M.L. Stern & Co. LLC of Beverley Hills, Calif., and Sorrento Pacific Financial LLC of San Diego — were not part of the deal.
Many advisers with the Pacific Life broker-dealers, which operated under the collective umbrella called Pacific Select Group LLC, based in Newport Beach, have been wondering who the owner would be.
Ameriprise Financial Inc. of Minneapolis until recently was rumored to be the most serious suitor for the broker-dealers.
“We’re thrilled,” Mark Casady, LPL’s chairman and chief executive, said. “We’ve been talking to Pacific Life for years.”
It’s the second major acquisition LPL has made since August, when it acquired UVEST Financial Services Inc. of Charlotte, N.C.
Linsco, based in San Diego and Boston, has seen major changes over the past 18 months. In 2005, two private-equity firms bought 60% of the firm, which was valued at $2.5 billion at the time.
Last week’s deal comes after many twists and turns.
In September, Pacific Life told its advisers that it was not negotiating any deal with Linsco.
“Good deals always get done,” Mr. Casady said. “Maybe it took a little longer than we would have liked.”
As part of the deal, Linsco is carving out the three broker-dealers and allowing them to continue using Pershing LLC of Jersey City, N.J., as a clearing firm.
Linsco is self-clearing, and prior to the deal, many industry observers believed that advisers switching to the Linsco platform from Pershing would have been a major sticking point.
MSC advisers were told of the deal in an e-mail at 8:30 a.m. Friday.
“It’s no surprise. What’s interesting is a separate network [of advisers] on a Pershing platform,” said one ad-viser, who asked not to be identified.
“It’s a better fit than Ameriprise,” said another adviser, who also asked not to be identified. The adviser said that Linsco’s structuring the deal to allow advisers to use Pershing was key.
“They’re trying to minimize the impact” on advisers, he said. “They don’t want to stress anybody out, so [reps] don’t go anywhere.”
And Linsco’s top management is well aware of those advisers’ anxieties from hearing months of unbridled rumors about an acquisition. Recruiters from rival firms have been working assiduously to convince reps and advisers to leave the Pacific Life broker-dealers.
“They need worry no longer,” said Bill Dwyer, president of LPL independent-adviser services. He stressed the high quality of the advisers and broker-dealers Linsco obtains in the deal as making for a good fit for both sides.
Adding the reps Linsco obtained from the UVEST acquisition, close to 3,000 of Linsco’s advisers eventually will use the Pershing platform. In December, Linsco announced that it was taking over the clearing and back-office operations for Pershing’s largest client, AXA Advisors LLC of New York.
Pacific Life is also giving a bonus to advisers at the end of 12 months, but the details still need to be worked out, Mr. Casady said.
He also stressed that top management at the three broker-dealers will be kept in place.
All three have seen chief executives exit since August, right around the time Linsco began its pursuit of the broker-dealers. John Dixon, the president of Pacific Select group, will remain chairman and chief executive of the group of broker-dealers under the LPL umbrella.
In a conference call with advisers Friday afternoon, management from both sides of the deal stressed the benefits, and stability, of the deal. “We’re not planning on making any changes to MSC,” Mr. Casady said. “It’s business as usual for you. It’s business as usual for the MSC staff.”
John Dixon, president of the Pacific Select Group, thanked the advisers for their patience as news and speculation of the deal unfolded, adding that the broker-dealers most likely would need to build up management going forward.
And he clearly was optimistic about the future. “MSC’s going to take off again and grow like it did a few years back,” Mr. Dixon said.