Last week's announcement that John Hancock Financial Services was selling independent broker-dealer Signator Investors Inc., with 1,800 advisers and about $50 billion in assets, to Advisor Group did not come as much of a surprise.
Industry rumors had been swirling for several months that Signator was on the block, with John Hancock regarded as yet another insurance company with no interest in the low-margin, high-risk retail brokerage business.
One question hanging over the deal is whether Advisor Group's primary owner, Lightyear Capital, still has interest — or the financial wherewithal — to pursue Cetera Financil Group, the prized brokersage property on the market right now.
Cetera, with 8,000 brokers and advisers, could fetch a price as high as $1.5 billion.
As to whether Lightyear still has an appetite for Cetera, which it apparently did just a few weeks ago, let's look at two more questions before arriving at an answer.
First, does Lightyear Capital have the cash to spend on another acquisition, particularly one as sizable as Cetera? With 8,000 brokers and advisers, Cetera could fetch a price as high as $1.5 billion.
Next, do Lightyear and Advisor Group have the determination and experience to pull off another deal?
Leading off, the money.
Terms of the Signator acquisition were not released, but recent history and a bit of back-of-the envelope math peg the firm's value at roughly $160 million.
That's about half of what LPL Financial paid Jackson National, also an insurance company, for National Planning Holdings, an independent broker-dealer network roughly twice the size of Signator, that it bought last summer.
If Lightyear paid John Hancock in that neighborhood for Cetera, it likely has plenty of cash for another purchase, even one as large as Cetera. Industry bankers and executives routinely comment about the loads of capital in the market right now chasing deals to buy broker-dealers and RIAs. Lightyear's coffers were likely not depleted by buying Signator.
Next up, the deal makers at Lightyear and Advisor Group.
Industry veteran Donald Marron, founder and chairman of Lightyear Capital, has a history of pulling off such deals.
In 2010, Lightyear Capital bought a network of broker-dealers from the Dutch insurer ING for an undisclosed price and rechristened the group Cetera (Yes, the same Cetera it is now said to be pursuing.)
Four years later, Lightyear Capital sold Cetera for $1.1 billion in cash to RCS Capital Corp., or RCAP, the defunct brokerage once controlled by former nontraded real estate investment trust czar Nicholas Schorsch.
Lightyear, along with Canadian pension manager PSP Investments, bought Advisor Group in early 2016.
Valerie Brown, executive chairman of Advisor Group's board, has been pulling off deals for years. She was CEO of Cetera when it was acquired by RCAP, and was at the head of Cetera in 2013 when it acquired MetLife's two independent broker-dealers, Tower Square Securities and Walnut Street Securities.
"I'm guessing Advisor Group and Lightyear are still interested, and in the hunt for Cetera," said Jodie Papike, president of Cross-Search, a recruiting firm. More intriguing to her is how such a merger would work.
"Signator is being rolled up into Royal Alliance (one of Advisor Groups's four broker-dealers). How would you merge such a massive acquisition like Cetera with other broker-dealers? Or would you leave them to work independently?"
Advisor Group spokesperson Olivia Gagnon declined to comment. "We're not in the business of commenting on speculation," she said.
The independent broker-dealer industry will continue to consolidate, and Advisor Group and Lightyear are well positioned to buy more firms. Look for them to stay in the race for Cetera.