EQB Inc. EQB-T, the company that owns online bank challenger EQ Bank, is expanding its wealth management footprint with the purchase of a 75-per-cent stake in ACM Advisors Ltd., a B.C.-based alternative asset manager with $4.8-billion in assets.
On Tuesday, EQB announced plans to acquire ACM Advisors for an undisclosed amount that will be paid in a cash and share transaction. EQB common shares will be issued through a private placement offering five days prior to the closing date, which is expected to be before the end of 2023.
Under the deal, which is still subject to regulatory approval, ACM Advisors will operate as an independent majority owned subsidiary of EQB – separate and distinct from EQB’s wholly owned subsidiary Equitable Bank.
Founded by Al Collings and Gord Allan in 1993, ACM Advisors specializes in the management of pooled Canadian commercial mortgage funds on behalf of pension plans, investment funds, charitable foundations, corporations and retail investors.
Over the past five years, ACM Advisors has doubled its assets under management to nearly $5-billion with more than 200 institutional clients across the country, as of Sept, 30. The team of 40 employees, who reside in offices in Vancouver, Halifax, Toronto and Montreal, will remain with the company. They include ACM’s chief executive officer Chad Mallow and chief operating officer Chad Mercer.
ACM’s expertise in curated commercial real estate mortgages caught the eye of EQB president and CEO Andrew Moor.
“This is an asset class EQB knows well since we have provided financing to commercial clients for more than 50 years within Equitable Bank,” Mr. Moor said in a statement. “As part of EQB, ACM has the support to successfully scale in the years ahead.”
ACM’s commercial loan portfolio is a good fit for EQB and adds to the capabilities of its subsidiary Equitable Bank, EQB chief financial officer Chadwick Westlake said in an interview. Currently, Equitable Bank has a commercial loan portfolio of $28-billion – of which 70 per cent is invested in multi-unit residential housing.
“Wealth management, and the many market segments it represents, is strategic to EQB and we believe this acquisition is directly on point for us,” Mr. Westlake said. “It addresses our goal of growing and diversifying fee-based revenue, and ACM aligns extraordinarily well to our risk appetite and approach to return on equity and value creation.”
Over the past five years, Canada’s largest financial institutions – including the big banks – have been investing heavily in wealth management acquisitions as companies prepare for baby boomers to enter retirement, and billions of dollars to generationally change hands.
Earlier this year, Bank of Montreal purchased a minority stake in alternative asset manager Sagard Holdings, while in a joint acquisition in 2020, Mackenzie Financial Corp. and Great-West Lifeco Inc. purchased a majority stake in private equity firm Northleaf Capital Partners for $245-million. And in 2018, Toronto-Dominion Bank scooped up the country’s largest institutional asset manager, Greystone Managed Investments Inc., for $792-million, while Bank of Nova Scotia paid $950-million for fund manager Jarislowsky Fraser.
Mr. Westlake said EQB was looking to add a strong name to its roster as it looks to “challenge some of the bigger established players, particularly TD Greystone who has been a big competitor to ACM.”
“We thought it would be a very competitive bidding process and we believe this ended up being the case amongst many large financial institutions,” Mr. Westlake added.
With over 2,000 existing clients, ACM will also provide EQB the opportunity to expand certain alternative assets into the retail segment – particularly investment options that can be added into EQ Bank’s retail channel.
The majority of ACM’s investors are currently institutional, with the largest proportion with the pension plans, said Mr. Westlake. But ACM also has a growing base of accredited retail investors.
“ACM wants to accelerate retail plans and they see us as an opportunity to do that,” said Mr. Westlake.
“We hope to work with them to expand in these capabilities, asset classes and investor reach including on the retail side.