The rumor that Schwab (NYSE:SCHW) has interest "comes as a bit of a shock," says Nomura's Steve Chubak, calling deal hurdles for public acquirers "insurmountable," and believing a P/E rollup to be the more likely outcome.
What could make a Schwab buy somewhat more likely, he admits, is the idea that the DOL fiduciary rule could be softened under a Trump administration/GOP Congress.
Other headwinds might also abate, as LPL Financial (NASDAQ:LPLA) would be one the largest beneficiaries of higher interest rates.
Chubak and team's analysis sees roughly 11% accretion potential should Schwab buy, "however, the uncertainty around the realization and timing of these benefits suggests that attractive deal economics are far from certain and that takeout consideration by SCHW seems remote."
William Katz sees a very low likelihood of Schwab (SCHW +0.7%) buying LPL Financial (LPLA +3.4%), noting management has promised to use capital for bank sweep migration and bolt-on acquisitions, rather than transformative deals.
Katz, however, doesn't discount the possibility of another party gunning for LPL.
According to DealReporter, LPL Financial (LPLA +1.6%) is in talks with private-equity bidders. There's also the idea, says DealReporter, that E*Trade (ETFC +0.4%) could have interest following TD Ameritrade's purchase of Scottrade.
LPL in October hired Goldman Sachs to assist with strategic options, including a possible sale.
Of the above group, Ladenburg Thalmann (NYSEMKT:LTS) is of small enough size ($730M market cap) to easily be scooped up. Raymond James (NYSE:RJF), LPL Financial (NASDAQ:LPLA), and Waddell & Reed (NYSE:WDR) are all higher since the Stfiel purchase first leaked on Friday morning, suggesting investors for the moment aren't too concerned with Stifel's boosted firepower.