Richardson GMP Ltd. is becoming by far the largest independent wealth manager in Canada with the purchase of Macquarie Group Ltd.'s Canadian retail business.
Macquarie Private Wealth Inc. will be sold to Richardson GMP for a price of about $132-million in a deal that will nearly double the firm's assets under administration to $28-billion.
The deal marks a major consolidation of non-bank-owned investment firms. It's also a significant retreat from Canada by Australian investment bank Macquarie, which recently made significant cuts to its Canadian capital markets unit.
The takeover comes at a time when independent retail brokerages are battling against the big Canadian banks for business. The small firms that rely on advising retail investors for most of their income lost a collective $99-million last year, Investment Industry Association of Canada data suggest. The banks continue to invest heavily in their asset and wealth management groups and benefit from deep distribution channels.
This deal is an indicator that the scale of a business is more important than ever for independents, and that joining together to shoulder expenses and recruit high-performing employees may be these firms' best chance at competition.
"The wealth management industry in Canada has been dynamic over the last few years," Andrew Marsh, president and chief executive officer of Richardson GMP, said in a statement on Monday. By making this acquisition, he said his firm shows that it "can compete with larger institutions, while maintaining a boutique culture."
Richardson GMP will sell new shares to raise cash for the acquisition. A James Richardson & Sons Ltd. subsidiary and GMP Capital Inc. will both equally subscribe to a preferred share offering worth $60-million, and another $30-million will be raised by issuing shares to Richardson GMP shareholders on a pro-rata basis.
Macquarie Private Wealth business is currently run by Earl Evans. The group was formerly known as Blackmont Capital, which was acquired by parent company Macquarie Group Ltd. in 2009 and subsequently rebranded. Prior to that, Blackmont was a part of CI Financial Corp. after being purchased as part of a $251-million acquisition of independent financial services firm, Rockwater Capital Corp.
The deal for Macquarie Private Qealth is expected to close before the end of the year, pending regulatory approval and other closing conditions.
Macquarie Capital Markets Canada Ltd., the other half of Macquarie's Canadian business, will not be effected by the deal, according to the release. But that group has also been making changes. Last week, the business eliminated its real estate investment banking team and its leveraged finance group. It said that both teams were not "core" to the company's business as it continues to define its role in the Canadian marketplace.
The capital markets division has offices in Toronto, Calgary, Montreal and Vancouver.