LPL Financial to Acquire Allen & Company

SAN DIEGO – May 21, 2019 –LPL Financial Holdings Inc. (Nasdaq: LPLA) (collectively with its subsidiaries, “LPL”), today announced LPL has entered into a definitive purchase agreement to acquire Allen & Company of Florida, Inc., a broker/dealer and registered investment adviser (RIA) based in Lakeland, Fla. Allen & Company employs approximately 30 advisors and serves approximately $3 billion of client assets.

“We are excited that Allen & Company has chosen to join the LPL family,” said Dan Arnold, LPL Financial president and CEO. “We are focused on M&A opportunities that align with us strategically, operationally and financially, and Allen & Company is a great fit on all fronts. The firm is made up of great advisors with values similar to ours who are focused on making a positive difference in the lives of their clients, employees and the communities they serve. We look forward to working with Allen & Company on the next phase of their growth leveraging LPL’s capabilities and platform.”

“We are fortunate to have been able to support thousands of clients over the past eight decades, and we are ready to take our business to the next level,” said Ralph Allen, Chairman of Allen & Company. “Partnering with LPL provides us enhanced investment and technology platforms so that we can continue to focus on serving our clients and their families. We are excited to use the strength of LPL’s advisory and centrally managed platforms, open-architecture product offering, and integrated clearing capabilities. Most of all, we look forward to being a part of the LPL team that is committed to helping their advisors and clients succeed.”

The purchase agreement was signed on May 17, 2019, and the transaction is anticipated to close by the end of 2019, subject to receipt of regulatory approval and other customary closing conditions. Under the transaction structure, LPL will onboard Allen & Company advisors and staff as employees and maintain Allen & Company’s operations and brand. Allen & Company client assets will onboard with LPL’s custodial platform. The purchase agreement provides for an initial purchase price and a potential contingent payment based on the portion of Allen & Company’s client assets that are onboarded to LPL’s platform above a specified threshold. The Company estimates a transaction multiple of ~7x post-synergy EBITDA*.

About LPL Financial

LPL Financial is a leader in the retail financial advice market and the nation’s largest independent broker-dealer**. We serve independent financial advisors and financial institutions, providing them with the technology, research, clearing and compliance services, and practice management programs they need to create and grow thriving practices. LPL enables them to provide objective guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions.

**Based on total revenues, Financial Planning magazine June 1996-2018

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC
 

Forward-Looking Statements

Statements in this press release regarding LPL’s and Allen & Company’s future operating results, growth and plans, including potential future levels of assets serviced, advisor headcount and post-synergy EBITDA*, as well as any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements. These forward-looking statements are based on the historical performance of LPL and Allen & Company and LPL’s plans, estimates and expectations as of May 21, 2019. Forward-looking statements are not guarantees that the future levels of assets serviced, results, plans, intentions or expectations expressed or implied by LPL will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause levels of assets serviced, actual financial or operating results, levels of activity, or the timing of events, to be materially different than those expressed or implied by forward-looking statements. In particular, LPL can provide no assurance that the assets reported as serviced by Allen & Company’s financial advisors will translate into assets serviced at LPL, or that Allen & Company’s advisors will join LPL. Important factors that could cause or contribute to such differences include: satisfaction of closing conditions under the parties’ purchase agreement, including receipt of transaction approval from the Financial Industry Regulatory Authority and the stockholders of Allen & Company’s parent corporation, which include an employee stock ownership plan; difficulties and delays in recruiting Allen & Company’s advisors and/or onboarding the clients of Allen & Company’s advisors, which could negatively affect LPL’s ability to realize revenue or expense synergies or other expected benefits of the transaction; disruptions of LPL’s business that could make it more difficult to maintain relationships with its financial advisors and their clients; the choice by clients of Allen & Company’s advisors not to open brokerage and/or advisory accounts at LPL; changes in general economic and financial market conditions, including retail investor sentiment; fluctuations in the value of assets under custody; effects of competition in the financial services industry, including competitors’ success in recruiting Allen & Company’s advisors and their clients; and the other factors set forth in Part I, “Item 1A. Risk Factors” in LPL’s 2018 Annual Report on Form 10-K and any subsequent SEC filing. Except as required by law, LPL specifically disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release, even if its estimates change, and you should not rely on those statements as representing LPL’s views as of any date subsequent to May 21, 2019. Estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.
 

*Non-GAAP Financial Measures

Management believes that presenting certain non-GAAP measures by excluding or including certain items can be helpful to investors and analysts who may wish to use some or all of this information to analyze LPL’s current performance, prospects, and valuation. Management uses this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Management believes that the non-GAAP measures and metrics discussed below are appropriate for evaluating the performance of the company.

EBITDA is defined as net income plus interest expense, income tax expense, depreciation, and amortization. LPL presents EBITDA because management believes that it can be a useful financial metric in understanding LPL’s earnings from operations. EBITDA is not a measure of LPL’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of profitability or liquidity. In addition, LPL’s EBITDA can differ significantly from EBITDA calculated by other companies, depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments. LPL does not provide an outlook for  EBITDA because it contains certain components, such as taxes, over which LPL cannot exercise control. Because an outlook for EBITDA cannot be made available without unreasonable effort by LPL, a reconciliation of LPL’s outlook for EBITDA to its outlook for net income also cannot be made available without unreasonable effort.