Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Kurt MacAlpine, CEO of CI Financial.

Tijana Martin/Handout

The investor relations page on CI Financial Corp.’s website promises, “Everything you need to know about how CI is performing.”

Well, maybe not.

The long-time Bay Street mutual fund company is making a bold and expensive foray into the U.S. wealth management industry under its young new CEO Kurt MacAlpine. When Mr. MacAlpine took over in 2019, its asset management division, which manages its Canadian mutual funds, was three times the size of its wealth management business. Now, the latter division is larger. Since the beginning of 2020, it has acquired 19 U.S. registered investment advisers, spending well over $1-billion in the process.

Story continues below advertisement

At least, we suppose that’s the cost of the strategy, as of now. While CI Financial trumpets the assets it is acquiring and profits the firms generate, its disclosures on deal-spending are buried in securities filings, lagging the other announcements. A comprehensive picture of the assets flows at its burgeoning U.S. business is absent, and it’s not clear that it’s forthcoming. CI also won’t make any estimates of the synergies it will get from the deals.

All that makes it difficult to get a clear picture on whether it’s in the midst of a shrewd acquisition program – or a wild spending spree. And it may help explain why investors aren’t giving CI credit for what Mr. MacAlpine says is a plan to build the leading private wealth platform in the entire United States. “I think we have a criminally undervalued stock price relative to the quality of the business that we have and the strategic initiatives that we have under way,” he said in May during the company’s quarterly earnings call.

CI doesn’t reveal a purchase price for each single transaction – understandable, since it doesn’t want to give examples of how much it’s paying to other U.S. wealth management companies it might target, and the owners of the selling firms probably don’t want folks to know the size of their cash-out.

But when it comes time to give numbers for the U.S. wealth management business as a whole, CI is falling short.

CI Financial names new head of investment management

New acquisitions boost CI Financial Corp.’s wealth division

CI’s investor presentations highlight the assets under management for each firm and the total EBITDA, or earnings before interest, taxes and depreciation and amortization, it has acquired in the most recent tallying of deals. One must root around the company’s securities filings to see outlays in the footnote on purchase price accounting, or in the statement of cash flows for the cheques written in the past quarter. And those numbers don’t coincide with the EBITDA presentations, because they refer to different batches of deals.

The 2020 annual report gave us the most current number: For 10 U.S. firms, plus one Canadian acquisition, CI Financial spent $537.4-million in cash, plus $35.4-million in stock, plus another estimated $318.3-million in “contingent payments” that are future expenses based on how profitable the acquired firms are. That’s a total of $891-million for firms with collective assets under management of about US$26-billion at the time of acquisition, according to my read of CI’s news releases. On a dollars-per-assets basis – which is one way to evaluate these deals from the outside – that suggests CI is paying rich multiples.

Murray Oxby, the company’s vice-president of communications, says, “The assertion that CI has provided insufficient disclosure is incorrect.” He says the company disclosed that the firms acquired in 2020 were operating at a 40-per-cent EBTIDA profit margin and generated growth in new-client assets of 9 per cent.

Story continues below advertisement

“While we don’t disclose acquisition multiples for competitive purposes, investors can use our financial statements and other disclosures to estimate an aggregate acquisition multiple for all the deals we completed,” he says.

To do it, he says, take the first-quarter wealth management EBITDA total, annualize it, and compare it the 2019 EBITDA, before the acquisitions occurred. Since “nearly all” of the increase is from acquisitions, the disclosed guaranteed payments – not counting the contingent payments – imply they’re paying roughly 7.5 times EBITDA, he says.

I am not the only one seeking more from CI: The analysts who cover the company have been struggling to match up deal prices with acquired profits and come to judgments on the economics of the new U.S. wealth management division.

In the first-quarter call, RBC Dominion Securities Inc. analyst Geoffrey Kwan asked Mr. MacAlpine for “anything you can provide to help answer at least some of these questions.” When Mr. MacAlpine replied that, “You can triangulate it – we’ve been very clear on a quarter-by-quarter basis,” Mr. Kwan pointed out that CI’s EBITDA disclosure “doesn’t always match up” with the purchase prices in the financial statements.

James Shanahan, an analyst with Edward D. Jones & Co. LP in St. Louis, said in an interview that he’d like to see CI track the wealth management division’s changes in assets for various reasons – market appreciation, growth from existing clients bringing in more assets, and what was added to the division via acquisition. “Then, we could fairly evaluate the performance of the acquired advisory firms over time.”

It may not be everything you need to know about how CI is performing, but it would be a lot better than what we have now.

Story continues below advertisement

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies