RCAP back on acquisition trail

RCS Capital Corp. resumed building out its retail broker-dealer network Thursday, announcing it had closed on its acquisition of VSR Financial Services Inc., a mid-sized independent broker-dealer known for selling alternative investments.
VSR will become the 10th broker-dealer to operate under the umbrella of the Cetera Financial Group, the retail and wealth management division of RCS Capital Corp., or RCAP.
The broker-dealer holding company first announced the acquisition of VSR, home to 264 registered reps and advisers, in August.
Industry observers wondered whether the deal would be finalized after a related company, the giant net lease real estate investment trust American Realty Capital Properties Inc., or ARCP, revealed in October a $23 million accounting error that was intentionally uncorrected.
That admission has led to a broad shake up and realignment of the real estate and brokerage empire created by Nicholas Schorsch. Mr. Schorsch, the architect of RCAP and ARCP, has since resigned as chairman of both firms, although he remains the controlling shareholder of RCAP. Both RCAP and ARCP have grown quickly in the past 24 months due to a furious pace of acquisitions.
Broker-dealers and clearing firms temporarily halted sales of nontraded REITs and other products marketed by Realty Capital Securities, the marketing and wholesaling broker-dealer controlled by RCAP. RCAP’s share price has fallen 41% since the reporting of ARCP’s accounting problems and was trading Thursday at $11.64.
VSR advisers have $12.3 billion in assets under administration. Terms of the deal were not disclosed.
RCAP also expects to close on the acquisition of another broker-dealer, Girard Securities, this month. After Girard is added, Cetera will have 9,520 brokers serving clients with $236.4 billion in assets under administration.
And RCAP may not be done. RCAP “continues to see consolidation opportunities in the industry as firms view scale and enhanced technology as important benefits to broaden their service offering to financial advisers and their clients while continuing to preserve their longstanding culture,” said RCAP chief executive Michael Weil, in a statement.
William Katz, a brokerage analyst with Citigroup Global Markets Inc., called RCAP’s closed acquisition of VSR “another incremental positive” in a research note Thursday. “We continue to see management executing towards guidance with the closure of VSR, especially given skepticism from “Bears” that the deal would not close and that the delay portended onerous regulatory challenges,” Mr. Katz wrote.
VSR and Girard Securities together are expected to add between $7 million to $12 million of EBITDA, or earnings before interest, taxes, depreciation and amortization, in 2015 to RCAP, he noted.