Lightyear Capital's Donald Marron said to be in the hunt for Cetera Financial Group

The veteran brokerage executive, who bought Advisor Group in 2016, owned Cetera once before

Mar 22, 2018 @ 2:46 pm

By Bruce Kelly

Veteran brokerage executive Donald Marron is a serious contender to buy Cetera Financial Group, according to several sources familiar with the potential deal.

Cetera, a network of six broker-dealers, is exploring a sale that could be worth about $1.5 billion, according to a report in February from Bloomberg. Cetera would not confirm that report, but said that it had started a capital structure review and hired Goldman Sachs & Co. as part of the review process.

Mr. Marron, who ran PaineWebber for decades before it was bought by UBS in 2000, did not return phone calls to his office on Thursday. Founder and chairman of private equity firm Lightyear Capital, he is particularly suited to buy Cetera, noted sources, who asked to not be identified.

Indeed, he knows Cetera well.

In 2010, Lightyear Capital bought a network of broker-dealers from the Dutch insurer ING for an undisclosed price and rechristened the group Cetera. Four years later, Lightyear Capital sold the Cetera network 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.

Mr. Marron's sale of Cetera for cash is of note because Mr. Schorsch bought other independent broker-dealers around the same time, but used RCAP stock to pay for portions of those deals. That stock became worthless when Cetera filed for bankruptcy in early 2016 after Mr. Schorsch burdened the company with debt to fuel an acquisition binge of broker-dealers that included Cetera.

Cetera's parent company later emerged from bankruptcy and hired a veteran of LPL Financial, Robert Moore, as its CEO.

Asked to comment on a possible deal with Mr. Marron, a spokesman for Cetera, Joseph Kuo, said, "As a matter of policy, we never discuss hearsay, gossip or any other kind of speculative chatter of this nature. What we can say is this: Cetera has only recently initiated a capital structure review. Our goals are to lower our cost of capital and increase our continued investments in the business."

Lightyear and Canadian pension manager PSP Investments bought independent broker-dealer Advisor Group in 2016 from American International Group Inc. Advisor Group is made up of four firms with a total of about 5,000 advisers. Insurance companies like AIG, which formerly embraced the retail brokerage business, have soured on it due to the risks and problems of using retail advisers to sell proprietary products like variable annuities.

Besides Mr. Marron, there are other connections between Advisor Group and Cetera. The executive chair of Advisor Group, Valerie Brown, is the former CEO of Cetera Financial. She left in 2014 shortly after RCAP announced it was buying Cetera Financial.

The six firms that make up the independent broker-dealer network of Cetera are: Cetera Advisor Networks, Cetera Advisors, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities and Summit Financial Services Group. Together, they have close to 8,000 brokers and financial advisers.

Others on Wall Street have wondered whether LPL Financial, which has grown through a number of acquisitions, and Cetera could potentially be a match. A spokesman for LPL, Jeff Mochal, said that, as a matter of company policy, the company does not comment on rumors or speculation.

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