The buyer was in Australia. The seller was in Houston. And in an increasingly common twist, one of the advisers on the deal was in Canada.
When Australia’s BHP Billiton Ltd. laid out $15.1-billion (U.S.) in cash and stock to buy Petrohawk Energy Corp. to gain U.S. shale gas reserves, BHP chose two banks to help negotiate the deal. There was London-based Barclays Capital, the eighth-largest investment bank in the world by fees earned, and Canada’s own Scotia Waterous, a unit of the Bank of Nova Scotia.
BHP’s gobbling up of Petrohawk and its huge shale gas reserves in the southern U.S. was the largest non-Canadian deal that a Canadian firm has ever advised on. It’s also the biggest example of the traction some of the country’s investment banks are getting as they go global.
Increasingly, Canadian banks that have expanded out of the country have found themselves working on transactions with no connection to Canada. Where once offices in New York or London were built to work on business coming into or going out of this country, now firms headquartered in Toronto are finding themselves hired because of their expertise and global reach.
Companies are hiring firms such as Scotiabank, RBC Dominion Securities Inc. and Canaccord Financial Inc. not because they are Canadian, but because they are good. That marks the maturation of the Canadian financial sector into a more global player. And while the work doesn’t show up in the league tables for advising on Canadian deals, the fees help the bottom line all the same, creating a stronger financial hub in Canada.
“You can’t be a global player without a big business outside of Canada,” said Adam Waterous, head of Scotia Waterous. With offices in Houston, London, Singapore and Hong Kong as well as Calgary, Scotia Waterous estimates that one-third of its deals these days are in Canada, with the rest split between the United States and the rest of the world.
Mr. Waterous says the world still views Canada as a place where advisers know resources best.
“There are two sectors which travel very well outside of Canada: oil and gas, and mining,” he said, “and when talking about deals outside those sectors there is an immediate skepticism that has to be overcome.”
Some of his peers are clearly managing to do just that. While they have big teams in mining and energy, firms such as RBC and Canaccord are managing deals outside the resource space and outside of Canada.
Royal Bank of Canada’s investment banking business, RBC Dominion Securities, generates about half of its deals outside Canada, said Doug Guzman, who heads global investment banking at the firm.
When British utility Northumbrian Water, partly owned by Ontario Teachers’ Pension Plan, went up for sale, RBC was working on the deal – but not for the seller’s side with the Canadian connection through Teachers. RBC was on the other side of the table, advising Hong Kong’s Cheung Kong Infrastructure on the transaction.
“Ten years ago, even five years ago, nobody would have imagined that RBC could have been an adviser on a transaction like that,” said Peter Buzzi, head of mergers and acquisitions for RBC.
The smaller independent firms in Canada are even getting into the act.
GMP Capital Trust’s securities unit opened an office in Australia, and not long after was doing an $85-million financing for an Australian civil engineering company, and helping the company use the money to make an acquisition.
Canaccord has spent a dozen years expanding outside Canada to create a global firm. Lately, the focus has been on buying securities and investment-banking firms in Asia and Britain to complement its existing businesses in Canada, the United States and London. The firm now has operations in 12 countries.
Last year, the Toronto-based firm worked on an initial public offering on the New York Stock Exchange for a Chinese phone-security company called NetQin Mobile Inc., alongside U.S.-based banks Piper Jaffray & Co. and Oppenheimer & Co. Now, Canaccord is leading a London Stock Exchange IPO for an oil company that works in Nigeria.
“You’re seeing Canadian investment banks becoming very relevant on the global stage,” said Paul Reynolds, chief executive officer of Canaccord. “Clients are looking for global advice.”