Big IBD Next Financial on the block

Prospective buyers have been kicking the tires at the firm, which has 739 affiliated registered reps and advisers, according to executives familiar with the potential sale

Sep 11, 2015 @ 12:08 pm

By Bruce Kelly

Next Financial Group Inc., a large independent broker-dealer based in Houston, is on the block, according to several brokerage executives with knowledge of the firm's potential sale.

Prospective buyers have been kicking the tires at Next Financial over the summer, according to the executives, who spoke anonymously because of the confidential nature of the negotiations. The asking price was not clear, they said.

With 739 affiliated registered reps and advisers, Next Financial in 2014 produced $130.4 million in total revenue, according to the most recent InvestmentNews survey of IBDs. Of that, $83 million (63.7%) was from commissions, and $41.7 million (32%) was from fees. Revenues from fees is considered to be more desirable in the securities industry because of its annual predictability.

MARKET COOLED

The market for broker-dealer M&A has cooled considerably in 2015 after a torrid 2014. That's when Nicholas Schorsch, former executive chairman of RCS Capital Corp., or RCAP, completed a string of broker-dealer acquisitions to build a 9,500 rep network under the umbrella of Cetera Financial Group.

Mr. Schorsch resigned from RCAP at the end of last year, two months after the revelation of a $23 million accounting mistake at another company he controlled. In August, RCAP announced it was selling its wholesaling broker-dealer to Apollo Global Management.

Founded in 1999, Next Financial is owned by its reps and employees. Its clearing firm is Pershing.

Next Financial has seen a recent change in its leadership. Gordon D'Angelo, former CEO and chairman of Next Financial Holdings Inc., the parent company to the firm, resigned in December. Mr. D'Angelo was one of the original six principals of the firm.

NO OFFER

Barry Knight, president of Next Financial Group, said he had no comment when asked whether the firm had been in recent discussions with potential buyers. And he stressed that the company has not had an offer from a potential buyer to show the rep and employee shareholders.

“Any offer that was deemed appropriate by the board would be presented to the shareholders,” Mr. Knight said. “At this time, no such offer has been presented to us.”

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