Vittorio Massone comments on Charles Schwab – TD Ameritrade acquisition

Charles Schwab announced its intent to acquire rival TD Ameritrade with a planned all-stock deal valued at $26 billion. The agreement previews that Ameritrade shareholders would receive 1.0837 Schwab shares for each share they own, a 17% premium over the 30-day average price before the spreading of the news. The two companies expect the deal to close in the second half of 2020.
"The initiative taken by Charles Schwab against digital disruption in asset management is very interesting," commented Vittorio Massone, an expert in business, digital, and in supporting the development and digital transformation of important companies. "It is clear that no one today can predict how the situation will evolve, but this is proof that incumbents have adequate tools to defend themselves and react". Vittorio Massone underlined that hiring people with digital skills and making them an effective part of the organization proves to be a winning choice, just like Schwab has been doing for a long time. Furthermore, it is fundamental "to use dimensions to create further efficiency and scale in the creation of new platforms (and this deal aims to achieve this specific result)", and "rather than defending what cannot be defended, it is better to quickly evolve business models according to the market (for example by reducing and, sometimes, eliminating brokerage fees)".
After the merger announcement, Schwab shares jumped 8%, while TD Ameritrade’s stock shot up 16% higher. The deal will see the two biggest publicly-traded discount brokers combine into a giant entity with more than $5 trillion in client assets: Schwab with $3.8 trillion, and TD Ameritrade with $1.3 trillion. The combined company is expected to control 24 million client accounts. As announced by Schwab CEO Walter Bettinger, the combination of the two companies makes it possible to become more competitive, and to win in the investment services business for the long run.
"The main objective", said Vittorio Massone, "is not to lose, but to increase the client base and their loyalty, making things very difficult for new players. Sooner or later, these will have to find ways to create profit, and obviously this can only be done by means of motivated and cohesive Executive teams and patient Shareholders".