Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Ally Financial Makes an Acquisition

By Eric Volkman - Apr 7, 2016 at 2:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company strikes a deal to buy TradeKing Group for approximately $275 million.

What happened?
Ally Financial (ALLY 3.72%) is motoring ahead with efforts to diversify its offerings. The company announced that it has reached an agreement to acquire privately held TradeKing Group, an online financial services company with around $4.5 billion in client assets. The price is roughly $275 million.

IMAGE SOURCE: ALLY FINANCIAL. 

TradeKing offers a menu of services, including stock trading and research, but the big draw for Ally is the company's wealth management arm.  

In the press release announcing the deal, Ally quoted CEO Jeffrey Brown as saying that "[t]he addition of wealth management is the next key step in Ally's digital product evolution and will create a powerful combination of segment-leading direct banking and innovative investment services in a single integrated customer experience."

The TradeKing Group acquisition is subject to approval from the relevant finance industry regulators.

Does it matter?
That depends on how well Ally can sell those wealth management services -- not to mention the other TradeKing offerings -- to its existing customers. The company is right to be attracted to the activity, as it's potentially very lucrative. Rival financials are well aware of this, however, and many have their own wealth management efforts, running them with varying degrees of success.

Regardless, this deal fits comfortably with Ally's ambitions to diversify away from its core business of auto lending -- the company began life, after all, as General Motors' financing arm. Particularly at the moment, that's a solid niche to be involved in, but having a wider variety of income streams will make shareholders sleep better at night.

Ally does not anticipate that the TradeKing absorption will have a meaningful impact on its 2016 or 2017 performance. This might change in subsequent years, however, as according to the company, " consumer preferences drive a greater shift toward digital wealth management services." Investors will certainly be hoping as much, so they should keep an eye on how effectively Ally develops TradeKing's services. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ally Financial Stock Quote
Ally Financial
ALLY
$41.80 (3.72%) $1.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.