Euro Pacific Canada’s growth strategy runs counter to the Street

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Euro Pacific Canada Inc. is pursuing a growth strategy when many shops on Bay Street are being forced to exit the industry.

On Thursday, the Toronto-based wealth management firm said it had acquired Dundee Goodman Private Wealth, a division of Dundee Securities Ltd., tripling its size to 100 investment advisers and adding offices in Toronto, Montreal, Ottawa, Calgary, Vancouver and Victoria.

Upon completion of the deal, Euro Pacific Canada will see its assets under management climb to $4.2-billion from $700-million.

The deal was announced with an undisclosed price, although David Cusson, chief executive officer of Euro Pacific Canada, said his company probably paid a lot less than Dundee could have fetched from another buyer.

"We wouldn't have done this deal if it didn't financially make sense to us," Mr. Cusson said. "I do think they could have gotten a better price but this was not a price-driven discussion. Dundee did a lot of due diligence to find a firm that would be the best fit for their advisers and we met a lot of the criteria of what they were looking for."

While the Euro Pacific brand is well known in the U.S. market through the Euro Pacific Capital name under CEO Peter Schiff – the same can't be said for the Canadian operation within the wealth management industry.

The firm entered the Canadian marketplace in 2010, when Mr. Cusson, along with co-founders Russell Starr and Rob Furse, approached the U.S. entity to launch an independent Canadian operation. Though Mr. Schiff signed on as a non-controlling investor and provides the occasional economic commentary, the firm is 100-per-cent Canadian owned and operated.

"We formed a relationship with Euro Pacific Capital, where we are sharing a brand and we have access to Peter as a strategist and economic commentator," Mr. Cusson said. "But on a management level, we are completely independent from the U.S. firm."

Over the past five years, the firm has grown to 20 advisers and 70 employees, but Mr. Cusson had been looking to add scale for some time. Despite exploring a large number of potential deals, he couldn't find what he was looking for until last fall.

In November, the firm finalized its first acquisition with the purchase of Pope & Co. Ltd., a smaller securities firm based in Toronto.

The much-larger Dundee deal not only includes a book of business in the wealth management space, but also the support staff and infrastructure that Euro Pacific was on the hunt for.

"We weren't just looking for a group of advisers," Mr. Cusson said. "We wanted expertise in compliance, accounting, IT, and sales support staff."

The deal that both parties are calling a "good fit" came as a surprise to some on Bay Street, as several other independent firms were said to be potential buyers – including Mackie Research Capital Corp. and Industrial Alliance Securities Inc.

The deal comes as many smaller independent brokerage firms are struggling to survive, as they have to deal with increased compliance costs and regulatory burdens.

Mr. Cusson said he isn't worried about the regulatory environment, as the firm continues to be profitable and is already in acquisition talks with several other Investment Industry Regulatory Organization of Canada (IIROC) dealer firms that would help expand the business beyond the Dundee deal.

The bigger challenge right now for Mr. Cusson will be retaining the Dundee assets, as many of the advisers have already been shuffled a number of times as firms continue to shut their doors.

"Any acquirer knows that as soon as an announcement is made that a firm is being sold, both the advisers – and clients – start getting calls from competitors about moving firms, so communicating this quickly is key," said Dan Richards, CEO of ClientInsights, a consultant to the financial advisory industry.