Charles Schwab buys rival TD Ameritrade in an approximately $26 billion all-stock deal, a blockbuster deal accelerated by disruption in the online brokerage industry.
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The tie-up creates a company so big, however, that it may draw scrutiny from antitrust regulators. The combined company would have more than $5 trillion in client assets under management. By itself, Schwab controls roughly half the market for holding money managed by and providing other services to registered investment advisers, according to estimates by Kyle Voigt, an analyst with Keefe, Bruyette & Woods. TD Ameritrade may control about 15% to 20%,
Beyond players like Schwab, TD Ameritrade, Fidelity and E-Trade Financial, apps like robinhood.com out of Palo Alto, California, have entered the fray in recent years to help customers get invested in the market. Merging with another company helps to lower costs. Such combinations in the industry typically see the acquirer shaving off 50% to 70% of the costs of its buyout target, while holding onto about 90% to 95% of its revenue, according to analysts at Barclays.
The deal between San Francisco’s Schwab Corp. and TD Ameritrade Holding Corp., of Omaha, Nebraska, would marry the biggest publicly traded brokerages. Schwab had $3.85 trillion in total client assets at the start of the month, while TD Ameritrade had $1.3 trillion at the end of September.The deal is expected to close in the second half of next year. It’s anticipated to take 18 to 36 months to integrate the two businesses once the transaction is complete.
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