LPL Financial: Acquiring Atria Wealth Solutions for a Reasonable Price

LPL Financial announced that it’s acquiring Atria Wealth Solutions. Atria has about 2,400 advisors and works with about 150 financial institutions with $100 billion of client assets, which compares with LPL at the end of the fourth quarter of 2023, with 22,660 advisors and $1.35 trillion of client assets. LPL is paying about $805 million, but there’s also an additional $230-million earnout based on how many Atria advisors are retained and an expected $300 million-$350 million of onboarding and integration costs. With an 80% retention rate, LPL estimates that the acquisition will generate $140 million of run-rate EBITDA. At the low end, LPL would be paying about $1.1 billion for Atria, including $300 million of integration and onboarding costs, which seems reasonable compared with the $140 million of run-rate EBITDA. LPL plans to partially fund the acquisition with debt, which will raise its net debt/EBITDA ratio to about 2 times, and the company intends to pause share repurchases until the acquisition is closed in the back half of 2024. We will be remodeling narrow-moat-rated LPL Financial assuming that this acquisition goes through, but currently don’t anticipate it will lead to a significant change to our $289 fair value estimate for the company.