Hellman, TPG gain control of brokerage

Hellman & Friedman and Texas Pacific Group have agreed to a roughly $1.5 billion deal to acquire a 60 percent stake in Linsco/Private Ledger, an independent broker. The transaction, coming on the heels of the Refco implosion, reaffirms private equity’s commitment to the financial services space.

A buyout team made up of Texas Pacific Group and Hellman & Friedman agreed to acquire control of independent broker Linsco/Private Ledger (LPL). The 60 percent stake the firms are buying has been valued at approximately $1.5 billion (€1.24 billion), and LPL’s founders and employees will retain the balance. The deal is expected to close by the end of the year.

The demand for this [financial] advice will continue to grow rapidly as retirement planning needs and investable assets increase significantly in coming years

Jeffrey Goldstein, managing director, Hellman & Friedman

The Boston and San Diego-based LPL generated revenues of $1.1 billion last year and managed over $100 billion of assets. The company operates 3,000 branch offices, with a client roll of over 1 million.

Both Hellman & Friedman and Texas Pacific Group have a history in financial services. San Francisco-based Hellman has made investments in US exchange The Nasdaq Stock Market, institutional money manager Mondrian Investment Partners and Arch Capital Group, a reinsurer. Texas Pacific, meanwhile, has placed bets on groups such as financial services outfit Fidelity National and reinsurance provider Endurance Specialty Holdings.

If there was any notion that the highly publicised implosion of Refco would put private equity groups off from financial services transactions, this deal serves to dispel that thought. In fact, Texas Pacific Group was part of the JC Flowers & Co. consortium that had nearly agreed to buy the derivatives dealer last week, a deal that reportedly unravelled due to a dispute over the break-up fee.

Regarding the LPL acquisition, Hellman & Friedman managing director Jeffrey Goldstein spoke to the developments in the industry brought on by the aging baby boomers, saying “the demand for this [financial] advice will continue to grow rapidly as retirement planning needs and investable assets increase significantly in coming years.”

Once the deal is completed, Mark Casady, LPL’s current president and CEO, will also assume the chairman’s role. Company co-founder and current chairman Todd Robinson will become chairman emeritus, while Dave Butterfield, presently a vice chairman and co-founder, will retire. Jim Putnam, another co-founder, will continue to serve as vice chairman.

LPL was advised by Morgan Stanley and Goldman Sachs on the sale of the company, while Simpson Thacher & Bartlett served as legal counsel. Wachtell Lipton Rosen & Katz and Arnold & Porter both served as counsel to the buyers.

Representatives for Texas Pacific Group declined comment for this story and representatives Hellman & Friedman were unable to return phone calls by press time.