If Canaccord Financial does take over Genuity Capital Markets, a deal that's by no means done, the founders of the employee-owned firm will have turned in one of the Street's more impressive wealth creation exercises.
Vancouver-based Canaccord is in exploratory takeover talks with Genuity, and while there are daunting cultural and leadership issues to overcome, there's also a sense that the two dealers' specialties mesh. There's also a sense that previous reporting on this deal seriously understated Genuity's value: Sources say the investment bank is likely worth $280-million to $350-million in a takeover or an initial public offering, far more than projected.
If a sale does play out at that kind of price, Genuity co-founder David Kassie and his partners have increased the value of their stake in the firm by something on the order of tenfold over the past five years.
This price tag reflects the relatively dependable profit that follows from Genuity's mix of business. Founded in 2005 by veterans of CIBC World Markets, Genuity consistently generates fees from a lucrative blend of mergers and acquisitions, corporate finance and restructuring work for corporate clients of all sizes, with an emphasis on mid- to large-capitalization companies. Canaccord has more of a small-cap focus, and a larger mix of business that includes retail wealth management.
Advisory-style firms tend to command impressive multiples to their earnings, on the logic that these revenues are relatively dependable. Evercore Partners, for example, is a publicly traded boutique U.S. dealer with an M&A and private equity focus, and its stock commands 19 times forecast earnings. Evercore has a $1.1-billion (U.S.) market cap.
Canaccord stock changes hands at a slightly lower multiple - 14 times forecast earnings - and a $530-million (Canadian) market cap. That discount to Evercore's multiple reflects a view that this dealer's profitability is more volatile. Buying Genuity on the right terms could change the market's view of Canaccord, and boost the buyer's price-to-earnings multiple.
Sprott springs for Olympics
Eric Sprott is out twisting arm for athletes, as the money manager and his firm pledged $100,000 for each gold medal Canada wins at the Olympics, and challenged his friends in Corporate Canada to step up.
Sprott Asset Management and a private foundation run by the founder announced yesterday that they will make a substantial donation to the Canadian Athletes Now Fund (or CAN Fund), which in turn will fund athletes who compete at future Olympics. The Sprott CEO is now out lobbying fellow executives to step up for the cause - he fired off more than 200 letters this morning.
Canadian Olympic athletes have never won gold on home soil, at the Montreal and Calgary Games. At a press conference in Toronto, Mr. Sprott said he hoped to write the largest possible cheque, holding out 15 gold medals as a goal, and saying "I prefer more gold medals to less."
The Sprott Foundation, a philanthropic fund run by the money manager and his family, also donated $210,000 to CAN Fund to clear a backlog of fund requests from athletes heading to the Vancouver Games next week.
Mr. Sprott runs a firm with $4.3-billion of assets under management, and is a noted gold investor. In making this gift to CAN Fund, Mr. Sprott said in a release: "As an investment firm, we've delivered results to our clients by making big bets on the future - and we wanted to use the same approach to build on our athletes' successes in Vancouver by providing funding for our athletes on a longer-term basis."
CAN Fund provides up to $12,000 a year to amateur athletes, and in an interesting twist, its supporters are linked directly to the competitors they back. The athletes are free to use the money on anything from training and team fees to coaches and travel expenses.
Raymond James adds depth
Technology has made all sorts of inroads into the relationships that used to underpin where an institutional investor sends stock trades.
But every dealer knows it's still critically important to have individuals on a trading desk who know how to talk to clients. That's what Raymond James recognized this week when it deepened its trading team in Montreal by landing trader and hedge fund expert Joseph Clement.
Mr. Clement co-founded an advisory firm two years ago that focused on risk arbitrage and global macro stock trading strategies, called Clement Shio & Co.
See Andrew Willis's Streetwise Blog at ReportonBusiness.com