Charles Schwab (NYSE:SCHW) completed its $22 billion all-stock acquisition of one of its major competitors, TD Ameritrade, on Oct. 6, creating one of the largest brokerage firms in the world.
The combined company will have a total of $6 trillion in client assets, 28 million brokerage accounts, and more than 5 million daily average trades. TD Ameritrade is bringing about $1.3 trillion in client assets and 12 million client accounts.
The integration of operations will take place over the next 18 to 36 months. Until then, Schwab and TD Ameritrade will operate separate broker-dealers to serve their respective clients with products, services, and delivery channels remaining largely unchanged.
The company believes the added scale will lower operating expenses as a percentage of client assets (EOCA). The merger is expected to result in $1.8 billion to $2 billion in expense synergies and be 10% to 15% accretive to generally accepted accounting principles (GAAP) earnings per share in year three.
Also, it will also allow the company to provide a broader and more extensive range of services to clients, including individual investors and registered investment advisors (RIAs). For example, Schwab has already announced plans to integrate TD Ameritrade's thinkorswim and thinkpipes trading platforms into its trader offerings for retail and independent advisor clients as well as TD Ameritrade Institutional's iRebal portfolio-rebalancing solution.
Schwab President and CEO Walt Bettinger had this to say about the company's plans:
Looking forward, we intend to quickly and efficiently harness our complementary strengths in order to break down even more barriers for investors. In doing so, we intend to deliver a winning combination of low costs, great service and industry-leading technology to support our clients, and the advisors who serve them, across every phase of their financial journey.
Effective Jan. 1, 2021, the company will move its corporate headquarters from San Francisco to its new campus in Westlake, Texas.
This is Schwab's fourth acquisition this year. It purchased the brokerage assets of USAA Investment Management as well as fixed-income, separate-account manager Wasmer, Schroeder & Company. It also acquired fintech provider Motif.
The market didn't have much of a reaction as the stock price was down in early trading. The financial firm's stock price is down about 23% year to date.