Dave McKay, CEO of RBC, poses on Bay Street in Toronto on Friday, July 25, 2014. In 2012, Mr. McKay, then Royal Bank of Canada’s personal and commecial banking head, was given the task of shaping RBC’s U.S. growth strategy. After some brainstorming, he set his sights on Los Angeles-based City National, which specializes in serving high net-worth clients.Darren Calabrese/The Globe and Mail
Before asking for a dinner date with City National Corp.'s chief executive, Dave McKay assumed the role of secret shopper.
In 2012, Mr. McKay, then Royal Bank of Canada's personal and commercial banking head, was tasked with shaping RBC's U.S. growth strategy. After some brainstorming, he set his sights on Los Angeles-based City National, which specializes in serving high net-worth clients.
Before making any official overtures, however, he decided it was best to snoop around. Assuming a fake persona, Mr. McKay visited the bank's New York office on Park Avenue, pretending to be an executive moving to Manhattan.
After listening carefully to Mr. McKay's story – the fake one, of course – City National's account managers offered him a full suite of bells and whistles, and diligently followed up after the meeting. "I was blown away by the experience," he recalled. "It made me feel very special."
Impressed, he asked Russell Goldsmith, who runs City National, to dinner. That sell was tougher than he expected, considering Mr. Goldsmith had never heard of RBC, Mr. McKay recalled with laughter.
Ultimately the two men met at the Peninsula Hotel in Beverly Hills in the summer of 2013. Over dinner, Mr. McKay stressed that a combination of their companies would offer a rare situation in which "1+1 = 4." RBC has an extensive wealth platform in the United States, but it needed a way to cross-sell these clients some private banking services; City National, meanwhile, specialized in private banking
Initially, Mr. Goldsmith politely rebuffed the idea. "He said: 'That's interesting, but I'm not for sale,'" Mr. McKay recalled. "I said: 'I know that, but I want to introduce myself, [because] as you think about your future … I really want you to pick up the phone and call us.'"
Mr. Goldsmith did just that a full year later, out of the blue. In the six months since, RBC has worked closely with him and his father, who previously ran City National and now serves as chairman emeritus, to reach a fair deal for both sides. The acquisition was dubbed Project Laker after the L.A. Lakers.
Mr. McKay believes City National ticks all the boxes he and his team laid out for their U.S. strategy. "Our biggest [lesson] from the failed [RBC Centura] venture was that you have buy the highest-quality franchise and build on it," he said.
City National is expensive but worth the price, he argued. Better yet, "the company was not for sale, and that was actually part of my strategy." Buyers get into trouble, he said, when they chase assets in an auction, without realizing why the assets were put up for sale in the first place.
What Mr. McKay wanted was a "crown jewel that's not for sale." He believes he got just that.