Just a day after announcing the acquisition of liquid alternatives manager Hatteras Funds, Nicholas Schorsch, head of American Realty Capital and the fast-growing RCS Capital Corporation (RCAP), said he intends to buy independent broker/dealer Investors Capital Holdings in Lynnfield, Mass. The 550-advisor b/d will continue to operate independently under the Investors Capital name, with its current president and CEO Tim Murphy at the helm.
The acquisition would add a sixth line of business to RCAP, which purchased Hatteras yesterday and IBD First Allied in June. The company expects to buy Investors Capital for $52.2 million, or $7.35 for each share of ICH stock outstanding, according to SEC filings. The deal also stipulates that Investors Capital pay a $3 million termination fee, if the merger doesn't go through or if the IBD makes a deal with another company.
In a statement, RCAP said the purchase would complement and diversify the company’s revenue stream from its other lines of business, which include a whole broker/dealer, investment banking and capital markets services, transaction management and transfer agency businesses. A few years ago, Investors Capital got into some hot water over sales of bad private placements. In November 2011, FINRA sanctioned the IBD, along with seven others, for failure to conduct adequate due diligence on the products, and the firm was ordered to pay $400,000 in restitution.
Besides taking names in the non-traded REIT business, Schorsch has been very busy lately. In early September, Schorsch lured Larry Roth, head of AIG’s Advisor Group, to serve as CEO of Realty Capital Securities, his wholesale broker/dealer. In August, Schorsch was named one of REP. magazine's Ten to Watch for 2014.
He also surprised many by getting to the IBD business with the purchase of First Allied, which has $32 billion in assets and 1,500 independent financial advisors. The deal closed last week. At the time of the announcement, Schorsch said he believed the IBD to be a good investment and that he believed in the open architecture of the independent space. He said he did not purchase the firm as a way to distribute his real estate products, as some speculated.
“This is not about buying distribution,” he said in June. “We already have 51 percent market share in the wholesale business, and we just shut down one of our selling groups because we couldn’t take any more demand. So the last thing we need is more sales in that space.”