Proxy Blog

The Charles Schwab Corporation Acquisition of TD Ameritrade Holding Corporation

May 26, 2020

The proxy had three proposals related to the acquisition: 

  • Approve issuing shares 
  • Authorize additional shares 
  • Authorize Board to adjourn meeting if more shares are required to approve the first two proposals 

Magni voted for the proposals on the proxy.  

  • Both McKinsey and Bain have done studies that show most large acquisitions destroy shareholder value. That said, acquisitions where the primary driver is consolidation tend to be more successful. This acquisition is a consolidation of a medium-size firm into a large firm. 
  • The financial services industry is experiencing falling prices, thus placing pressure on smaller competitors. Increasing scale provides advantages, thus more consolidations are expected. 
  • Schwab is a well-governed company and, hence, is better positioned to create value than other less well-governed companies. 
  • The transaction is an all stock deal. The market gyrations surrounding the pandemic have not changed the relative price of the deal (i.e., the prices of the stocks of the two companies have moved in tandem during the entire cycle of the pandemic). Had this deal had a significant amount of cash, then a decline in the stock price of TD Ameritrade, due to the pandemic, would have made the deal move expensive in relative terms.