Ladenburg Thalmann to Acquire KMS Financial Services
August 11, 2014
By Emily Zulz, ThinkAdvisor
Newest deal to add more than $14 billion in client assets, nearly 325 independent financial advisors, $84 million in revenue
Ladenburg Thalmann Financial Services Inc. (LTS) continues to grow its network of independent brokerage and advisory firms with its latest acquisition of KMS Financial Services Inc., a Seattle-based independent broker-dealer and investment advisor.
Ladenburg announced on Monday that it had signed a definitive agreement to acquire KMS, which brings with it nearly 325 independent financial advisors with more than $14 billion in client assets and revenues of approximately $84 million for the 12 months ended June 30. The deal is expected to close later this year.
Ladenburg will pay approximately $24 million — $11 million of cash, $8 million of four-year notes and 1,440,922 shares of Ladenburg common stock.
“KMS has been owned and operated by its key managers for more than 40 years, and has established itself as a client-focused firm committed to helping mainstream investors reach their financial goals,” said Richard Lampen, Ladenburg’s President and CEO, in a press release. “As a part of the Ladenburg family, KMS will retain its distinct brand while gaining the advantages of access to the differentiated products and services offered to our independent advisors, enabling them to meet evolving client needs, stay competitive and further grow their business.”
The pending KMS acquisition comes just after Ladenburg announced a pending acquisition of Sunset Financial Services Inc. in July. Combined, these acquisitions will bring Ladenburg’s network of independent brokerage and advisory firms to a total of approximately 3,500 financial advisors with $110 billion in total client assets and nearly $1 billion of annual revenues.
The deal will give KMS access to Ladenburg’s resources — like a fixed-income trading desk, wealth management services through Ladenburg Thalmann Asset Management, specialized point-of-sale support for life insurance products through Highland Capital Brokerage, and advisor-friendly trust services through Premier Trust — all while maintaining its same culture and management team.
Mark Hamby, KMS Chairman and CEO, and the rest of the management team will continue to operate KMS as a standalone business based in its current headquarters in Seattle.
“We have been impressed by Ladenburg’s record of acquiring independent brokerage and advisory firms with distinct cultures and helping them pool their collective strengths to capitalize on growth opportunities,” said Hamby, in a press release.
The announcement of Ladenburg’s KMS acquisition surprised recruiter Jonathan Henschen, who has worked with KMS since the mid-2000s placing representatives with the firm.
“It’s a firm I’m well acquainted with,” said Henschen in an interview with ThinkAdvisor. “Knowing Mark Hamby, they wouldn’t join another broker-dealer if [it] wouldn’t leave the company intact.”
He added that “I could see that being the only scenario that would be favorable.”
Ladenburg is consistently known for leaving its acquired broker-dealers as is, Henschen said.
“I do get concerned when firms are sold,” said Henschen, a ThinkAdvisor contributor. “But with this sell there won’t be any repapering. It will bring additional deep pockets, and they’ll be left alone.
I’m not too concerned. I don’t think there are a lot of unknowns with this purchase.”
For Ladenburg, the KMS transaction will give the company a significantly expanded presence in the Pacific Northwest.
According to the press release, this transaction is part of Ladenburg’s ongoing strategy to strengthen its position as an industry-leading network of independent brokerage and advisory firms and its market share in the industry. Ladenburg acquired its first independent broker-dealer firm in 2007, and its subsidiaries today include Securities America, Triad Advisors and Investacorp.
In July, Securities America announced its acquisition of Dalton Strategic Investment Services, an Indiana broker-dealer with 60 advisors in 18 states, $950 million in client assets and about $7 million in yearly fees and commissions. Later that month the firm announced its agreement with Sunset Financial Services Inc., which is expected to add 268 registered representatives in 48 states plus the District of Columbia, approximately $18 million in annual gross revenue and $2.4 billion in client assets to Securities America.