Merrill Lynch reportedly paid $400 million for the purchase of the Advest Group from AXA. The purchase includes the private client group, an asset management arm and a capital markets group. According to analysts, Merrill got the firm cheap.

“Merrill got the Advest Group for a song,” says one industry consultant who wished not to be identified. He says the normal purchase price for a rep is 70 percent of the previous year’s production. Average production in the industry is about $500,000, he says, meaning the purchase price for the average producer would be $350,000. Recruiters say Advest was among the better surviving regional firms and its reps are solid producers.

“Merrill paid roughly $167,000 per broker. Assuming that’s 70 percent of the trailing 12-month production, that’s a $238,000 producer. That’s pretty small these days. If these reps do any better than that, Merrill’s done well for itself.” (Here’s how he arrived at the numbers: Total equity ownership in Advest was $314 million as of Jan. 1, 2005, according to the Securities Industry Yearbook. Subtracting that from the Merrill purchase price leaves $86 million—the premium paid for the ongoing business of the 515 advisors. Dividing $86 million by 515 Advest advisors equals $166,990.)

A research report released today by Keefe Bruyette & Woods analysts confirms the deal was historically cheap. Of the $400 million purchase price, the analysts say it “represents roughly 1.25 times equity…which would be at the low end of historic transaction valuation ranges for broker/dealers.”