Two rival US structured product distributors will soon combine: Incapital LLC, the investment-banking firm that underwrites and distributes fixed-income securities and structured products, has forged an agreement with Bank of America to acquire LaSalle Broker Dealer Services Division. The division includes LaSalle Financial, the Florida-based unit distributing structured investments to the broker/dealer community.
Bank of America’s reason for selling to Incapital was redundancy, a spokesperson told SRP: “Banc of America Securities currently has an exclusive agreement with Incapital to provide similar services.” The financial details of the sale have not been disclosed. However, Bank of America originally acquired LaSalle’s broker/dealer operation as part of its $21bn acquisition of parent LaSalle Bank, which closed last October.
The acquisition, which is expected to close within the first quarter of 2008, will join two of the largest wholesalers of structured investments to retail investors in the US. It will also marry two of the largest underwriters of broker-sold and bank-issued certificates of deposit (CDs).
Moreover, Incapital will become the lead underwriter of nine of the top ten US corporate bond issuers for firms including Bank of America, GE Capital and others. LaSalle’s Direct Access Notes platform of corporate bonds specifically designed for the retail investor marketplace will be combined into Intercapital’s InterNotes platform, which was formerly managed as a joint venture between Intercapital and Banc of America Securities.
In addition, the firms’ combined global fixed-income, retail investor distribution platform will involve over 1,000 participating banks and dealers, representing financial consultants in Asia, Europe and North America.
“Corporate issuers, broker-dealers and individual investors will each benefit from the synergies created by combining the operations, technology and client services of Incapital and LaSalle Broker Dealer Services,” Incapital President Tom Ricketts said in announcing the acquisition.
Incapital was founded in 2001 and in 2007 saw revenue of $13m, according to data from Yahoo! Finance. The firm employed 40 people at year-end. As SRP went to press, Ricketts was not available to comment on whether additional employees, including former LaSalle veterans, would be added.
LaSalle, which began its business in 1979, won recognition last year for educating brokers on the ins and outs of fixed-income and structured product investments for retail investors. The firm made learning courses available through its LaSalleBondInstitute.com web site.
LaSalle credits executive vice president Gary Peters with pushing the distribution of bond investments as well as structured products to retail investors, an initiative that brought Wall Street’s bonds to Main Street investors. Peters retired from LaSalle in 2007. (His son, Steve Peters, left LaSalle and joined JVB Financial Group of Colorado in February 2006, establishing a direct competitor to LaSalle Structured Products Group’s growing distribution capability.)
LaSalle claims to have been the first to distribute index-linked CDs on an ongoing basis to the broker/dealer community, and pioneered the distribution of reverse convertibles to the masses. It has served the structured product and indexed-CD needs of 16 clients, among them ABN Amro, Barclays Bank, Fortis Bank (Cayman Branch) and Rabobank.
Despite the continued growth of the structured products industry, for the industry’s players it is a small and consolidating world.
On 14 January Bank of America announced it would acquire Countrywide Financial Corporation of Calabasas CA for $4bn in an all-stock deal. The acquisition included Countrywide Securities, the unit that, among other services, distributed structured products to retail investors. Bank of America was unable to comment as SRP went to press on the future of Countrywide’s structured product distribution business.
“Bank of America owns a sizeable stake in Incapital as well as its ownership of LaSalle and Countrywide Financial, which makes this consolidation a prudent and logical next step,” president and CEO of JVB Financial Vincent Butkevits told SRP. “We are trading partners with all of these firms and look forward to further developing these relationships now and as they continue to consolidate.” The LaSalle name has met the same fate as iconic brands such as Salomon, Prudential and Dean Witter, he added: “The broker/dealer landscape will have forever changed.”
