Schorsch Snaps Up J.P. Turner as Buying Spree Continues
January 14, 2014
by Janet Levaux, ThinkAdvisor
But being both a broker-dealer and a product distributor can be a ‘hot potato,’ says one industry expert
Billionaire Nicholas Schorsch and other managers at RCS Capital Corp. (RCAP) know how to get mergers and acquisitions done before the long Martin Luther King Day weekend.
The group announced plans to buy the independent broker-dealer J.P. Turner of Atlanta for $27 million, one day after reporting plans to buy Cetera Financial Group for $1.15 billion.
J.P. Turner has about 400 financial advisors and 50 insurance agents, according to the latest Investment Advisor survey, vs. 6,600 advisors at Cetera.
The deal “represents another important step in realizing RCAP’s strategic vision to become the leading financial-services firm focused on the direct-investment sector,” Schorsch, who is executive chairman of RCAP, said in the statement.
Industry observers generally agree, but point out such growth does involve some conflicting business interests that can get “tricky” at times.
“This reminds me of a quote from Eric Schwartz, chairman and CEO of Cambridge Investment Research,” said recruiter Jonathan Henschen, in an interview with ThinkAdvisor.
“Schwartz said in the past, ‘The independent space is going to look different in 15 years, when there are going to be seven or eight firms that control 90% of the space.’ That quote will need to be modified to 90% of the independent space will be controlled by Schorsch!”
RCAP, which specializes in sales of nontraded REITs, aims to expand its financial services operations. On a call with investors Thursday, Schorsch went so far as to say that the Cetera purchase, once completed, “brings us close to LPL Financial (LPLA) and puts us ahead of others in the business.”
“LPL is in his cross hairs,” said Henschen, a ThinkAdvisor contributor. “The objective for RCAP to surpass LPL in scale is apparently his goal, and he’s well on his way.”
But sales of American Realty Capital products via reps from rival IBDs, including LPL, are important to RCAP’s business as well.
“Having a product company and broker-dealers can be a political hot potato,” Henschen said, “since it can potentially threaten [product distribution] relationships with other BDs” due to tensions over aggressive recruiting, for example.