A Bay Street sign is seen in Toronto in this file photo.© Mark Blinch / Reuters
Investment bank Canaccord Genuity Group Inc. vaulted into the top ranks of a consolidating British wealth-management industry on Wednesday by acquiring rival Hargreave Hale Ltd. in a deal worth up to $134-million.
Toronto-based Canaccord will become the sixth-largest British wealth-management firm, up from its current rank as the 10th-biggest player, by adding Hargreave's 14,000 clients, 76 investment professionals and $13.5-billion in assets under management (AUM) to its existing British and European operations, which are home to 12,000 clients, 118 advisers and $24.5-billion in AUM.
Blackpool-based Hargreave was founded in 1897 and has offices in London and eight smaller British cities, adding a regional network to the Canadian firm's four British offices, in London, Jersey, Guernsey and the Isle of Man.
"The acquisition of Hargreave Hale is an important step in our strategy of building a leading global wealth-management business," Canaccord chief executive Dan Daviau said. He said Canaccord invested in British back office systems over several years to support growth – the firm made two acquisitions in England in 2017 – and the Hargreave operations add scale to this platform, without significant extra costs.
The British wealth-management industry is consolidating around its largest firms, a trend common to most mature markets that can be traced to rising costs for technology and compliance. While the country's role within the European Union is unclear, Mr. Daviau said the prospect of Brexit has minimal impact on the domestic money-management sector, which has strong growth potential.
Canaccord is paying $87.9-million in cash for Hargreave, along with up to $46.5-million in additional payments tied to the business's performance over the next three years. The transaction is expected to close in 2018, subject to regulatory approval, and is being funded in part with a $67.6-million loan from two British banks.
Hargreave is controlled by its employees and institutional investors, and shareholders who own 81 per cent of the firm are supporting Canaccord's offer. Hargreave's operations are projected to make a $3-million contribution to Canaccord's profit in the first year the two firms are merged, and $8-million or more in annual profit in subsequent years.