Securities America buying Dalton Strategic Investment Services

Trend of small and midsize broker-dealer mergers and acquisitions continues to build

Jul 8, 2014 @ 12:37 pm

By Bruce Kelly

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The market for broker-dealer mergers and acquisitions continues to heat up as Securities America Inc. said Tuesday it was acquiring Dalton Strategic Investment Services Inc., a small firm with 60 representatives and advisers.

Located in Knightstown, Ind., Dalton will become a branch of Securities America. Securities America is buying the assets of Dalton, namely its reps, but terms of the asset purchase were not disclosed.

Securities America's announcement to purchase Dalton's assets comes one day after LPL Financial said it was buying the assets of Financial Telesis Inc., a midsize broker-dealer with 203 advisers who focus on retirement planning.

Dalton Strategic Investment Services posted $4.4 million in total revenue last year and net income of $420,000, according to the annual audited financial statement filed with the Securities and Exchange Commission. Such small broker-dealers are struggling with increased technology and compliance costs, forcing them to seek a larger partner that can provide scale.

(Related: The decade's biggest IBD M&A moves)

“Will there be more M&A? Candidly, I do believe so,” said Steve Dalton, who founded the firm in 1988. “When I started, the procedures manual was 16 pages. Today it's 670 and headed north. If I wanted to continue to grow, I needed a strategic partner.”

Keeping up with compliance is becoming an increasing burden on small and midsize firms, said industry recruiter Jonathan Henschen. “It's just too much for them with regulatory hassles such as tracking of reps' business, their supervision and day-to-day compliance.

“I think there is a growing despair among small IBDs hating the business now,” Mr. Henschen said. “You will see an acceleration of small broker-dealers, with 50 reps or less, becoming [branches] and not running their own firm anymore.”

Securities America has completed five acquisitions or asset purchases of small to midsize broker-dealers since 2009. Dalton Strategic Investment Services is its sixth.

Similar broker-dealers are weighing their options about merging with a larger firm, said Gregg Johnson, senior vice president and director of branch office development and acquisitions at Securities America. “We continue to see [small and midsize firms] as a good growth opportunity and see more success in the coming year,” Mr. Johnson said.

Securities America, a subsidiary of Ladenburg Thalmann Financial Services Inc., is one of the largest IBDs in the industry. It has 1,749 producing reps and reported $475 million in total revenue last year.

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