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Mackie Research Capital Corp. has struck a deal to acquire boutique investment dealer NCP Northland Capital Partners, which specializes in junior resources.

Together, the two firms will have more than 300 employees and will remain employee-owned.

Rumours of possible consolidation within the boutique investment world raged all summer as mining investment banking revenues that many of these firms depend on dried up.  The heads of both Mackie and NCP acknowledged that these woes played a big role in pairing up.

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"When we started our pursuit in financial services back in 2010, it really looked like the timing was in our favour," said Bob Johnson, chairman and chief executive officer of NCP. Early on, it "looked like what we built made sense," given the strength in the fourth quarter of 2010 and the first quarter of 2011.

But since then the market for junior miners has been especially rocky, and NCP has gone through significant restructurings in Canada and the U.K., where it has a standalone business.

"Probably to [Mr. Johnson's] surprise and probably to most of the industry... a turnaround in the investment industry was short lived," said Geoff Whitlam, president of Mackie Research.

The latest numbers from the Investment Industry Association of Canada make this abundantly clear. Operating profits at Canadian securities firms plummeted about 60 per cent in the second quarter, relative to the quarter prior, as well as to the second quarter of 2011. In this environment, smaller firms are hurting the most.

To start negotiations, management from Mackie and NCP first met in early May, which was the first time Mr. Johnson met his new partners. In the months since they hashed out a deal, and NCP's capital, or reserve funds, will now flow into Mackie.

NCP partners will be paid in stock and subordinated debt. At this point, both Mr. Johnson and Mr. Whitlam acknowledge the two firms have some "redundancies" in Canada, but they didn't sound too severe.

Mr. Johnson will stay on at Mackie as a significant shareholder and in a management role that has yet to be determined. "Who's wearing what hat hasn't been determined," he said.

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Looking at the broader industry, both men agree there's bound to be more consolidation among boutiques because the environment is just too nasty right now.

"As the Globe and others have speculated, we think there's going to be further consolidation in the industry," Mr. Whitlam said. "We have seen some; probably less than I would have guessed."

Mr. Johnson was more blunt. "Consolidation or attrition. There are going to be fewer firms," he said.

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