Charles Schwab has been in talks with TD Ameritrade and a huge acquisition is reportedly being discussed.
According to CNBC, Charles Schwab is willing to pay over $25 billion to acquire TD Ameritrade. The stocks of both financial services companies have shot up on the news. TD Ameritrade’s stock was up 18% at the end of the week, while Charles Schwab was up 8%. The sharp rises in stock values signal a strong market belief that a merger would benefit investors.
A merger between the two financial giants is expected to allow the resulting company to reduce costs in back-end operations. In fact, analysts from Wells Fargo predict that Charles Schwab could potentially reduce the cost structure at TD Ameritrade by up to half. The result would very well be increased profits for both companies. Overall, both companies are performing well, with Schwab up more than 16% from the start of the year and TD Ameritrade up 0.9%.
These new talks have come just as both companies entirely did away with their trading commissions in an effort to cheapen investor costs. Both TD Ameritrade and Charles Schwab’s representatives were not immediately available for comment.