American International Group Inc. has emerged as the likely buyer of Woodbury Financial Services Inc., an independent broker-dealer being shopped by The Hartford Financial Services Group Inc., according to two sources with knowledge of the impending sale.
Announcement of a deal for the 1,500 producing registered representatives and financial advisers is expected before Woodbury's national sales conference in mid-August, industry recruiters and executives said.
If a deal comes to pass, Advisor Group —
AIG's network of three independent broker-dealers — would experience substantial revenue growth.
The three broker-dealers, FSC Securities Corp., Royal Alliance Associates Inc. and SagePoint Financial Inc., last year combined to produce $895.4 million in total revenue, according to
InvestmentNews' most recent survey of independent broker-dealers. The acquisition of Woodbury, which generated $253.7 million in gross revenue last year, would increase Advisor Group's top-line revenue by 28%.
That said, if talks drag out over a long period, the acquiring firm runs the danger of losing those brokers to competing firms, industry executives said.
The Hartford in March an-nounced its intent to sell Woodbury, along with a number of other noncore businesses, as part of a broad restructuring.
A spokeswoman for AIG, Linda Malamut, declined to comment.
Hartford spokesman Tom Hambric said: “It's our policy not to comment on market speculation.”
According to industry sources, three other firms have been in the running for Woodbury. Cetera Financial Group, Ladenburg Thalmann Financial Services Inc. and
LPL Financial LLC all have made large deals in the past few years to buy firms or acquire large groups of reps.
But Advisor Group may have the inside track because of professional connections between some executives, sources said.
Advisor Group chief executive Larry Roth and Woodbury chief executive Pat McEvoy once worked together at Vestax Securities Corp.
Woodbury's head of recruiting, Gary Bender, has a history with Royal Alliance. He left the firm last year to join Woodbury.
Cetera spokesman Jason Hron said that its broker-dealer network “seeks to grow through recruiting and continues to look at bringing additional broker-dealers into our family of firms. However, at this time, we cannot comment on any particular growth opportunities or recruiting agreements.”
Ladenburg Thalmann spokes-man Jonathan Doorley declined to comment.
LPL spokesman Michael Herley said that the firm doesn't comment about rumors or speculation regarding its acquisition strategy.
RECENT STRUGGLES
Insurance-company-owned broker-dealers have struggled in recent years as record-low interest rates have made many of the products that they offer, such as variable annuities, difficult to sell at a healthy profit.
However, given the recent mergers-and-acquisitions binge in the brokerage business, Woodbury is an attractive target for acquisition.
AIG “would love the high proprietary sales that the reps bring to the table,” said Jonathan Henschen, an industry recruiter.
In February, insurer Western & Southern Financial Group said that it was selling the assets of its independent broker-dealer, Capital Analysts Inc., to Lincoln Investment Planning Inc. And in January, insurer Genworth Financial Inc. sold its independent broker-dealer subsidiary, Genworth Financial Securities Corp., to Cetera Financial Group for $78.5 million, plus an earn-out provision.
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