24th April 2024

Better business. Better community

Business Industry and Financial

Departures at Rothschild Canada show history means nothing in investment banking

Rothschild & Co. has one of the great names in finance, a rich history of advising kings and captains of industry for more than 200 years.

That legacy means nothing in domestic investment banking circles.

In the latest sign of an industry that has come to value merit over bloodlines, Rothschild and several other long-established platforms have dropped off the league tables that demonstrate which banks are winning takeover and financing assignments from Canadian companies.

As storied franchises fade, employee-owned boutique firms are winning an increasing number of mandates.

Paris-based Rothschild’s commitment to Canada is in doubt after Alex Graham, the recently recruited head of its Canadian office, and two colleagues departed last month. Mr. Graham joined Rothschild in July, 2022, from RBC Capital Markets, where he ran or co-headed the technology, media and telecom teams in Canada and Europe. He was also a successful banker at Morgan Stanley.

Rothschild is a generation removed from its glory days in Canada, when the firm financed development of the massive Churchill Falls power project in Labrador in the 1960s. When Rothschild signed up Mr. Graham, its head of North American banking Jimmy Neissa said the strategy was to “further grow our leading franchise in the region.”

Those ambitions are now far more modest. Last week, the bank said in a statement: “Rothschild & Co. has a long-standing presence in the Canadian metals and mining sector, a core sector of our global business, and the firm remains committed to its presence in Canada.”

A number of other venerable names, including several European banks, exited or scaled back in the competitive Canadian market in recent years. Lazard Inc. LAZ-N, founded in 1848, closed its Toronto office in 2023. HSBC Holdings PLC HSBC-N, launched in Hong Kong in 1865, is selling its entire Canadian retail and corporate bank to Royal Bank of Canada to concentrate on British and Asian operations.

Last fall, the bulk of the domestic team at London-based Barclays PLC, which has operated in Canada for more than a century, jumped to Wall Street’s Jefferies Financial Group Inc. JEF-N – although Barclays moved quickly to fill some of those roles.

As banks that have been around for centuries become less relevant in domestic capital markets, entrepreneur-owned shops are taking their place.

The dominant players in mergers and acquisitions, and in finance, remain the six domestic bank-owned dealers and biggest Wall Street banks. Their role as lenders, along with their deep experience, guarantees they will remain essential to deal-making.

Once you get past these platforms, Canadian league tables feature names of firms that only win roles based on the quality of their advice and ideas.

Last year, one of the top M&A advisory shows was Origin Merchant Partners, a Toronto-based boutique launched in 2011 by veterans of big banks, including former Rothschild executive Gordon Bogden. Origin is one of several dealers advising Teck Resources Ltd. TECK-B-T on the US$8.9-billion sale of its coal mines to Glencore PLC, one of last year’s largest acquisitions. Origin also worked on takeovers for crypto platform Coinsquare.

Other dealers with next to no legacy but lucrative local mandates include Ardea Partners, launched in 2016 by veterans of Goldman Sachs Group Inc. GS-D-N Last year, the New York-based firm advised on two major deals involving Power Corp. POW-T subsidiaries, the sale of Putnam Investments and purchase of a stake in Rockefeller Capital Management. Ardea also worked for Teck.

New York-based PJT Partners Inc. PJT-N, an investment bank spun out of Blackstone Inc. BX-N in 2015, worked on five large domestic transactions last year, including Bank of Montreal’s acquisition of Air Miles program owner LoyaltyOne Co.

And it’s not as if the Europeans have lost their Canadian clout. London-based Arma Partners, a 20-year-old investment bank that’s focused on the digital economy, cracked last year’s domestic M&A league tables as an adviser on deals for Visma SA, a software company that’s based in Norway and backed by the CPP Investment Board. Arma’s founders also include Goldman veterans.

Advising on takeovers is a lucrative business. Even in what qualified as a down year for M&A, Canadian companies did US$184-billion worth of deals in 2023, according to data service Refinitiv. Fees for advising on these transactions ran to the billions.

Roughly half of domestic takeover traffic was cross-border, the sort of assignments that seem suited to global players with familiar names, such as Rothschild, Lazard or HSBC. Instead, the deals are going to established platforms, including the big banks, and a handful of upstart firms. Corporate Canada doesn’t care what bankers did, it cares about what they can do.

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