Proxy advisory firm Georgeson has closed its doors.Comstock Images
The granddaddy of Canada's proxy solicitation firms has closed its doors after 17 years in business, a victim of poor strategy and a market over-stuffed with competitors.
Georgeson Canada, headed by proxy industry veteran Roy Shanks, is closing its doors and has already shut down its web site, eliminating five jobs in Canada. The decision only affects the proxy solicitation business, and parent company Computershare will continue operating all of its stock transfer and shareholder services in Canada.
Georgeson's closure is being mourned across Canada's proxy solicitation sector because virtually every senior Canadian official in the industry started at the firm, which at one time was Canada's only proxy solicitation company. Proxy solicitors work with companies and dissidents to manage shareholder votes at meetings, and are especially prominent during contested battles when both sides use them to help win key votes.
One industry rival, who did not want to be identified, said Georgeson made mistakes in its business strategy over the years, but he is still sorry to see it disappear because of the storied role it played in launching the careers of most people working in the proxy sector in Canada.
"It was a very strong brand that really was mismanaged over the years," he said. "I think it is a sad moment."
Another industry executive said Georgeson had lost so much market share over the years that he believes it had become the smallest player in Canada's proxy solicitation market. He estimates the firm had just six corporate accounts left when it closed.
"They were the smallest, absolutely the smallest," he said. "They just didn't get much play."
He said the decision to close Georgeson in Canada appears to be the first major strategic move by Computershare Canada's new chief executive officer, Stuart Swartz, who was appointed in October. His appointment was part of a shuffle that occurred after Australian-based parent Computershare Ltd. appointed a new global CEO, Stuart Irving, last summer.
Rivals say pricing in the proxy business has become intensely competitive, with firms like Georgeson offering plunging bids to try to compete. The complex assignments couldn't always be executed profitably at such prices, however, and it became a money-losing strategy.
Moreover, Georgeson Canada appeared unable to capitalize on its connections within a much larger corporate structure.
While Computershare Canada serves as transfer agent to many of Canada's largest companies, Georgeson did not succeed in piggybacking on those connections to serve the same companies, and did not appear to work closely with its Georgeson affiliates in the U.S. or other countries.
"They thought that's where it was going when Georgeson [Canada] was acquired and became part of Computershare, but they just wanted to keep the businesses siloed," one industry official said.
Whether the strategy was intentional or not, it appears to be different from the publicly stated aims of rival transfer agent CST Trust Co., which is owned by U.S. giant American Stock Transfer & Trust Co. (AST).
In an interview in December, AST chief executive officer Mark Healy said the company intends to grow its Canadian proxy solicitation business – originally known as Phoenix Advisory Partners – by taking advantage of all possible synergies within the sprawling firm. AST bought giant U.S. proxy solicitation firm D.F. King & Co. last year and rebranded the Canadian proxy division as D.F. King Canada with plans to capitalize on connections between the U.S. and Canadian operations.
"A lot of the tools and analytics and tactics [D.F. King] used in their business are going to now be brought to bear in our Canadian business," he said.
The closure of Georgeson is another shift in what has become a constantly changing landscape for proxy solicitation firms in Canada. Not only has Phoenix been reborn multiple times as CST Phoenix and then as D.F. King Canada, but other firms have also gone through shifts.
Canadian industry leader Kingsdale Shareholder Services Inc., led by Wes Hall, announced a year ago it had sold a majority stake in its operations to MDC Partners Inc., headed by Miles Nadal. Kingsdale is now planning a U.S. expansion to broaden its scope.
Meanwhile, smaller competitor Laurel Hill Advisory Group saw three senior employees depart in late 2013 to found Canada's newest proxy solicitation business, Shorecrest Group. Shorecrest became a fifth player in the crowded market, but Georgeson's departure shrinks the sector back to four main companies.
An industry official said Canada's market may not be large enough to support even four companies, but said small firms with only a few professionals can stay in business with a small number of clients because their overhead is not high.
"If your strategy is only to pay your salary and pay a colleague or two, you can last a long time," he said.
Janet McFarland