The logo for the Bank of Montreal is seen at its branch Toronto, March 5, 2013.MARK BLINCH/Reuters
Expect more from Bank of Montreal's investment banking division in the United States. Having already built a big underwriting and advisory business at home, executives are keen to expand south of the border.
"We have a wonderful business in Canada," explained Perry Hoffmeister, global head of investment and corporate banking, "but where we expect a lot of the growth to come from is the U.S."
As part of this strategy, BMO is buying mergers and acquisitions boutique dealer Greene Holcomb Fisher, based in Minneapolis. The deal adds about 30 M&A specialists to Bank of Montreal's ranks, bringing its total to roughly 70 people in the U.S., and also doubles the bank's deal flow. Together the two businesses advised on 90 mergers and acquisitions worth $77-billion (U.S.) in 2015.
The U.S. has long been an important market for BMO, having bought Harris Bank in 1984 and then doubling down with the purchase of Marshall and Ilsley for $4.1-billion in 2010. Building out its capital markets business is, at a high level, an extension of this growth.
But beefing up in M&A is particularly important right now. The total value of all mergers and acquisitions involving Canadian companies and funds hit roughly $280-billion (U.S.) last year, according to Thomson Reuters, and 80 per cent were outbound, meaning Canadian buyers were incredibly active abroad. That statistic that isn't lost on BMO, explained Andre Hidi, the bank's global head for M&A.
BMO's capital markets division is also focused on serving mid-market clients south of the border – a strategy first outlined about five years ago. "There are thousands of companies in that size range … who we think are underserved by big banks in the U.S.," Mr. Hoffmeister explained.
In this market BMO believes it can stand out because it is a full-service financial institution, complete with businesses such as corporate lending, research and foreign exchange. Most firms serving mid-market clients are boutique dealers like the one BMO is buying, which typically focus on advisory work. By leveraging its corporate bank and other units suchs as derivatives, Bank of Montreal hopes to offer more – to treat mid-size companies the way bulge bracket firms would treat big-name corporations.
Because the U.S. is such a large country, BMO doesn't feel constrained to a specific sector or niche market, so it has targeted seven industries for advisory work including consumer and retail, health care and technology. The bank was first introduced to GHF about a year ago and liked that the five sectors it specializes in align perfectly with BMO's.
Financial terms of the transaction were not disclosed, which means the purchase price wasn't material to the bank. However, BMO is touting the deal because it is such a nice fit. "Even though it's a small acquisition in the context of BMO," Mr. Hoffmeister explained, "it's still strategic for us in the U.S."
BMO's U.S. expansion follows Royal Bank of Canada's, which saw the bank invest heavily in capital markets south of the border starting in 2009. RBC's growth strategy is highly praised in the industry, and because it was so successful the bank is now hoping to replicate it in Europe.
Editor's note: An earlier version of this story had an incorrect number of M&A specialists joining BMO through the acquisition. It is around 30, not 40.