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Two struggling independent broker-dealers have merged, joining forces to compete with larger firms in a challenging market for boutique shops.

Vancouver-based, resource-focused dealer Salman Partners Inc. acquired Woodstone Capital with the intention of creating a "diversified, independent" investment dealer, according to a statement.

"This is an important step in our continued strategic response to the changing structure of our industry," said Terry Salman, chief executive of Salman Partners. "We believe there's an opportunity…to offer alternatives to larger dealers," he added.

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More and more small dealers are consolidating as they face a dismal landscape. Commodity prices slumped and M&A activity dried up in the wake of the financial crisis, while the large investment dealers – owned by the big banks – have scooped up a greater share of the profits, making it fiercely competitive, and difficult for independent dealers to survive.

The head of the Investment Industry Association of Canada said in January that boutique dealers face an "existential" crisis. Salman Partners is no exception. Several senior staff have resigned over the past year as revenues across the industry have been squeezed.

Mr. Salman told the Globe and Mail in March that it's a "tough environment" for smaller-cap brokerage firms across Canada, because the big banks earn 80 per cent of the commission business. In this environment, evolve or perish seems to be the new mantra.

"You need to diversify to grow. This is the first step in that process for us," Mr. Salman explained Tuesday in an interview, adding that "numerous" brokerages had approached him to merge, but Woodstone is the one that stood out. The aim is to leverage Woodstone's experience in retail and wealth management and develop an independent full-service dealer. Traditionally, the big firms offer services at all levels of the market, while boutique dealers specialize.

"We're really just facilitating what was inevitable," said Mr. Salman. "Doing nothing was not an option."

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