Calgary-based aston hill Financial Inc. had been looking for more than a year to invest in an investment dealer. Aston Hill is looking no more, as, late last year, the diversified asset-management firm finalized a deal to purchase Halifax-based independent brokerage house Citadel Securities Inc.
Aston Hill offers its clients a suite of retail mutual funds, closed-end funds, private-equity funds, hedge funds and segregated institutional funds, and has approximately $6.5 billion in assets under management. But having a retail brokerage unit for distribution proved to be the "missing piece of the puzzle," says Aston Hill CEO Eric Tremblay.
Thus, he says, adding retail services to the mix gives the firm, which also has a private wealth-management division in Toronto, the ability to attract more mainstream clients and create unique, in-house offerings.
The key, however, was finding the right investment dealer - and that proved to be trickier than anticipated. "We've been shopping," Tremblay says. "We had a couple of false starts."
Deals were almost inked with firms in Vancouver and Halifax, as well as in Ontario - although the last was not the preferred location for a purchase. "We thought it would be more cost-effective outside Ontario," says Tremblay.
When the opportunity to buy Citadel came up, there was no hesitation; the entire deal went through in only a few weeks. It was, Tremblay says, "remarkably quick."
The transaction is all the more notable because Citadel co-owner and CEO John Hanrahan had no plans to sell. In fact, he already had turned down numerous offers. "We were approached every year by somebody, usually a national firm," Hanrahan says. "We never started [this regional dealer] firm to sell to a national firm."
That said, two factors tipped the scales in Aston Hill's favour. First, Citadel, which has offices in Charlottetown and Toronto, as well as Halifax, would be the first retail brokerage arm of Aston Hill, not a branch reporting through to a retail head office. "We didn't want to be just another office of brokers for a bigger firm," says Hanrahan, now CEO of Aston Hill Securities Inc.
With Aston Hill, Hanrahan says, he and his team will be building the parent's retail brokerage business: "I expect to have a Toronto office, a Calgary office. [But] we're in at the ground floor, as opposed to being taken over."
The second tipping point that persuaded Hanrahan to sell the firm he launched in 2006 is the regulatory burden. It had proved too much for the smaller Citadel to juggle operations and regulatory requirements. "We offered the same services as a big, national firm," he says. "That's the nature of the business in Canada. But we're regulated the same way as big national firms. It can be a challenge."