AIG Emerges as Most Likely Buyer of Woodbury Financial Services
July 20, 2012
by Bruce Kelly, Investment News
Announcement of a deal for the 1,600 reps and advisers is expected before indie B-D’s national sales conference next month
The 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.
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 noted.
The Hartford in March announced 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. Ladenburg Thalmann Financial Services Inc., LPL Financial LLC and Cetera Financial Group all are prominent players in the marketplace and have made large deals in the past few years to buy firms or acquire large groups of reps.
AIG “would love the high proprietary sales that the reps bring to the table,” said Jonathan Henschen, an industry recruiter.Others noted that 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.
Ladenburg Thalmann spokesman Jonathan Doorley declined to comment. LPL spokesman Michael Herley said the firm does not comment about rumors or speculation regarding its acquisition strategy.
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.”
Insurance-company-owned broker-dealers have struggled in recent years as record low interest rates have made many of the insurance products they offer, such as variable annuities, difficult to sell at a healthy profit.
However, there probably will be no shortage of potential buyers for Woodbury, given the recent mergers-and-acquisitions binge in the brokerage business.
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.