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Dec 31, 2020

Canaccord Genuity beats Canadian banks for top spot on 2019 IPOs

Canaccord beats Canadian banks for top spot on 2019 IPOs


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In a year many bankers and companies called “challenging” for initial public offerings, one independent Canadian firm bucked the trend -- outperforming the country’s biggest banks in the process.

Canaccord Genuity Group Inc. earned top spot for arranging IPOs for the first time in its history. The Toronto-based firm also extended its streak of managing the largest number of Canadian equity financings for the third year in a row.

“IPOs aren’t easy: they’re tough to get done, generally speaking, and we’re good at that,” Canaccord Genuity Chief Executive Officer Dan Daviau said in an interview at Bloomberg’s Toronto office. “We’re entrepreneurial, we’re agile, we’re aggressive, we’re all those things that you want if you’re an issuer.”

Canaccord’s No. 1 ranking for IPOs comes in a year that saw large stock sales led by the big banks pulled, including GFL Environmental Inc. and Triple Flag Precious Metals Corp. Still, companies raised about $3 billion from Canadian IPOs in 2019, up 13 per cent from 2018, according to data compiled by Bloomberg. Rankings and data are as of Dec. 30 and may change as more deals are recorded.

Canaccord oversaw 20 IPOs and claimed 56 per cent share of the total amount raised in Canada, the data show. The firm’s expertise with special purpose acquisition companies helped, after managing offerings by Subversive Capital Acquisition Corp., Mercer Park Brand Acquisition Corp. and Bespoke Capital Acquisition Corp. SPACS, as they are known, are publicly traded pools of funds set up to make acquisitions. Those three IPOs collectively raised $1.34 billion, priced in U.S. currency. Citigroup Inc. ranked second after working with Canaccord on Bespoke, its only Canadian transaction. Bank of Montreal was third.

Canaccord benefited by its focus on riskier mid-sized companies that large Canadian banks tend to ignore. It’s also competing with fewer firms amid industry consolidation. This year, its closest rival, GMP Capital Inc., sold its advisory and trading business to Stifel Financial Corp.

Companies raised $29.6 billion from secondary share sales in Canada in 2019, with Morgan Stanley ranking No. 1 with 16 per cent of the market for equity and equity-linked financing -- the first time a foreign firm took top spot since 2000, the data show. The New York-based firm arranged two sales for Restaurant Brands International Inc. totaling $3 billion, had a role on Shopify Inc.’s $694-million offering in September and lead a $354-million deal by Algonquin Power & Utilities Corp. in October. Royal Bank of Canada was second with a 13 per cent share followed by Bank of Montreal with 12 per cent. Canaccord was fifth with a 9.5 per cent share, but managed the most equity sales overall at 67.

Foreign firms also dominated advisory work for takeovers involving Canadian companies after being credited for a number of global deals touching the nation’s pension fund managers. Canadian entities were involved in 3,682 announced takeovers valued at $331.1 billion to Dec. 30, the data show. The biggest was London Stock Exchange Group Plc’s $27 billion takeover of Refinitive Holdings Ltd., a financial data and trading platform owned by Blackstone Group Inc., Canada Pension Plan Investment Board, Singapore’s sovereign wealth fund and Thomson Reuters Corp.

Daviau, whose firm advised on 21 takeovers totaling $5.85 billion, said private equity and large institutional investors will “100% continue to drive acquisition activity.”

“Values are good right now: the market is high, stock prices are generally pretty good, people feel pretty comfortable about using that paper to buy something or similarly sell themselves,” Daviau said. “For the next six months it feels like a very strong M&A market.”

Daviau sees a “particularly active” market in Canada for technology and mining, which he anticipates will be “robust” next year with more transactions, especially those involved in precious metals.

Cannabis companies will continue to find it hard to raise capital, though Canaccord is becoming increasingly active in doing debt financing for the industry, and consolidation is on the rise, he said.

Canaccord’s deal-making gains aren’t prompting Daviau to deviate from his strategy of expanding wealth management to offset capital markets volatility. The firm pivoted a couple years ago as an extended slump in resource markets eroded their investment-banking business.

“We are a wealth manager with an investment bank attached to it now,” he said. “It’s not the majority of our revenue, but it certainly is the majority of our earnings.”

Canaccord has more than doubled Canadian assets under administration to $20 billion since fiscal 2016, while turning its once money-losing North American wealth division into one that earned $26.8 million profit last fiscal year. The firm has hired 41 advisory teams for the Canadian wealth business in the past 18 month and plans to add more.

He’s also interested in buying any domestic wealth managers not owned by the big banks, including Richardson GMP and the Canadian operations of Raymond James Financial Inc. if they were for sale.

“We don’t believe there’s a lot of wealth transactions out there, but clearly if one became available we would be interested,” Daviau said.