Charles Schwab → TD Ameritrade
An all-stock deal worth about $26bn, agreed weeks after US retail brokers cut trading commissions to zero, combining the two largest discount brokers into a firm with $5 trillion of client assets.
An all-stock deal struck weeks after US retail brokerage moved to zero commissions, combining two of the four largest RIA custodians.
- Value
- $26B
- Announced
- November 2019
- Completed
- October 2020
- Sector
- Fintech
- Deal type
- acquisition
- Acquirer
- Charles Schwab (United States)
- Target
- TD Ameritrade (United States)
Why it mattered
In October 2019 Schwab abolished commissions on stock trades; TD Ameritrade, which earned a third of its revenue from them, followed within days, and its shares fell by a quarter. The merger announced the next month was the consequence: with trading free, the business was net interest on client cash and scale in custody, and TD Ameritrade could not reach the scale alone. Toronto-Dominion Bank, which owned 43% of TD Ameritrade, took 13% of Schwab in the exchange.
The deal put more than half of US retail brokerage assets and most of the custody of independent advisers in one firm, and the Department of Justice cleared it after a review of the adviser-custody market. It closed in October 2020; moving TD Ameritrade's clients onto Schwab's platform took until 2023.
What it left behind
The zero-commission model as the industry standard, with Robinhood on one side and Schwab–Ameritrade on the other, and a demonstration of what a price war does to the number two: the firm that could not survive free trading was bought by the firm that started it. For fintechs whose revenue depends on a fee the leader can abolish, it is the case to study.