Brokerage GMP Capital Inc. and Winnipeg's billionaire Richardson family spent the past few years building a vast network of financial advisers, with a 2014 deadline for GMP to make an offer to buy out the Richardsons. Now the two sides are backing away from that plan.
The fate of independent wealth management firm Richardson GMP is now in the hands of six board members.
Richardson GMP has shifted decisions on the future direction of the company to board members representing three separate groups: GMP Capital, Richardson Financial Group, and the company's financial advisers. Each group will have two seats on the board representing its approximately one-third ownership.
"We've altered the language of this 2014 roll-up event to be much more driven by a board of directors decision rather than being calendar driven," said Andrew Marsh, Richardson GMP's chief executive officer.
When Richardson GMP arose after the 2009 merger that combined the struggling retail units of both GMP and Richardson, the firms set a five-year target for GMP to make an offer to take over the whole business in November, 2014.
That would work by GMP and Richardson negotiating the acquisition. If no deal could be reached, GMP was set to deliver an offer, and Richardson could choose to accept, or decline and negotiate again the next year. If it accepted it could also sell its stake to another, higher bidder.
But after the last three years of market volatility and low returns to clients, the buyout by GMP looks less feasible.
The decision to eliminate the agreement and patiently wait for the right opportunity for Richardson GMP wasn't the only change made by the company. Richardson GMP has created a liquidity pool with a valuation of what the company thinks the market would pay for it.
It's a good option for those employees who were looking to 2014 as their retirement date. The event allows the firm's aging work force to retire and sell shares at full liquidity value. Other partners may purchase the shares. It also allows the company's other demographic – employees aged 35 to 45 – the opportunity to buy more shares.
The private company won't disclose that valuation, but Mr. Marsh called it "competitive to market values," and a figure that would "silence critics."
"I've literally talked to every one of our partners across Canada over the last three weeks, and now that we have a validation to our valuation of our shares, no one wants to sell," Mr. Marsh said. He indicates the company's positive cash flow and dividend payments are attractive to retirees.
The first liquidity date is scheduled for Dec. 31, 2013.
The change in leadership may also help Richardson GMP in its recruiting efforts.
Unchaining the company from that looming 2014 deadline opens up more options for employees. Richardson GMP could roll up into GMP Securities – which is still Mr. Marsh's preferred option – but the firm could also stay private, go public, or sell to another company.
While Mr. Marsh concedes that the last three years have been a struggle for the company, he is optimistic that the business model and company culture are solid and that the next economic cycle is taking shape.
"We really believe we can become the strongest independent firm in Canada and grow from $15-billion to $20-billion, $25-billion," he said.
The move toward board of directors decisions follows an early January effort to restructure the company's back office, along with part-owner GMP Securities. The year-long review resulted in savings of $1.8-million, for Richardson GMP, and increased its control over its business.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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