The deal is sealed -- and Nicholas Schorsch's RCS Capital is now a major player in the financial advisory space.
Fast-growing RCS has closed its previously announced acquisition of Cetera Financial Group, the El Segundo, Calif.-based independent broker-dealer network, from affiliates of Lightyear Capital for $1.15 billion in cash.
By adding over 6,600 financial advisors, New York-based RCS becomes the country's second-largest independent network by number of advisors, with about 9,000 in total. Cetera chief executive Valerie Brown will become head of RCS's new retail advice platform.
"I don't think we bought it cheap, but I think we paid a fair price," Schorsch said of Cetera's hefty price tag in an interview with Financial Planning earlier this year.
RCS was willing to pay "full value" for Cetera, said Schorsch, the executive chairman of RCS -- best known heretofore for being a leader in the nontraded REIT industry. "If we were buying a small, little company with $50 million in revenue we probably should have paid 40% of revenue," he explained. "If we were buying a $100 million revenue company, we should have probably paid 65% of revenue. But when you're buy a $1.15 billion company, paying one times or .8 times -- which is what we actually paid, based on the 2014 run rate -- it's not a big price."
In a prepared statement, Schorsch called the deal "a watershed event for RCS Capital and the industry as a whole."
"Cetera will become the centerpiece of our financial services strategy to construct and operate the best independent financial retail advice platform in the industry, and act as the hub of our integrated broker-dealer strategy," he added.
RCS now has a footprint in all 50 states, RCS chairman William Kahane noted in a statement. "The substantially expanded scale of our retail advice platform will help drive revenue growth and reduce costs through operational synergies," he said.
RCS's new retail advice platform will consist of Cetera and other IBDs the firm has acquired -- and is in the process of acquiring -- over the past year, a list that includes First Allied Securities, Investors Capital, Summit Brokerage Services and J.P. Turner.
The company has said they will all be operated as independent operating subsidiaries under separate brands and management, but with shared back-office and support systems.
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