Securities America Inc. has agreed to acquire rep-owned, independent broker-dealer Foothill Securities Inc., according to two industry sources.
In May, Foothill Securities chairman John Burroughs said that Foothill, an adviser-owned firm with 220 registered reps under its roof, was in serious discussions to be acquired by a larger firm. Securities America was one of the firms Mr. Burroughs identified at the time to be in the running to buy the firm.
Mr. Burroughs could not be reached to comment. Steve Chipman, president and CEO of Foothill, did not return a call on Wednesday to comment. Natalie Hadley, a spokeswoman for Securities America, said the firm declined to comment.
Details of the acquisition were unclear as of Wednesday afternoon.
Foothill Securities in 2015 generated $39.8 million in total revenue and posted a loss of $674,000, according to its annual audited financial statement filed with the Securities and Exchange Commission.
Securities America's acquisition of Foothill comes at a time when the common wisdom in the securities industry is that small and mid-sized broker-dealers such as Foothill are facing extinction-like pressures. Sales of high-commission products like variable annuities and nontraded real estate investment trusts are down across the board, and independent broker-dealers commonly operate on notoriously thin margins.
One recruiter noted that when a merger like the pending deal between Securities America and Foothill occurs, advisers should perform due diligence as if they were going to a completely new firm. “When something like this happens, advisers should study the situation and try to understand what the new firm's culture will look like,” said Jodie Papike, executive vice president of Cross-Search, a recruiting firm. “They need to stay informed and keep their options open.”
(See: Independent broker-dealers suffer worst year since credit crisis )
This year already has seen a steady pace of independent broker-dealer mergers and acquisitions. In January, American International Group Inc. said it was selling
AIG Advisor Group to private-equity firm Lightyear Capital and Canadian pension manager PSP Investments. At the end of February,
MetLife Inc. said it was selling its U.S. adviser unit to Massachusetts Mutual Life Insurance Co.
NFP Corp., a leading insurance broker and consultant, said in April it was selling a majority stake in its independent broker-dealer, NFP Advisor Services, to funds managed by private-equity shop Stone Point Capital. NFP Advisor Services is changing its name to Kestra Financial.
And National Holdings Corp. said at the end of April that it had reached an agreement to be acquired by Fortress Biotech Inc., a biopharmaceutical company that develops novel pharmaceutical and biotechnology products. National Holdings is the parent of two independent broker-dealers, National Securities Corp. and vFinance Investments Inc.
