By James Langton

(November 23 – 12:50 ET) – A proxy statement filed by Dain Rauscher regarding its planned take-over by Royal Bank highlights the evolution of the deal, and reveals something of the bank’s strategy for acquiring the brokerage.

Royal Bank is looking to Dain Rauscher expand the bank’s U.S. operations, build its U.S. wealth management capability, and enhance its ability to serve Canadian investment banking clients.

The statement notes that the acquisition of Dain Rauscher’s retail force, “provides a base for further growth, both internally and through acquisitions.” It says Royal Bank covets Dain’s strong position in equity origination and distribution for companies in the technology and energy sectors — sectors that Royal Bank has targeted for growth in the U.S. The bank also expects revenue synergies through potential cross-selling between Dain and its other U.S. subsidiaries, Security First Network Bank and Prism Financial Corp.

The proposed deal really got underway in late March, when a representative of Lazard Freres & Co., expressing Royal Bank’s interest in Dain contacted Dain CEO Irv Weiser.

In February, Dain had entered a confidentiality agreement with Credit Suisse First Boston Corp. about another possible deal, but that fell through in early March. So Weiser met with reps from Royal Bank on April 5. “Weiser indicated that a transaction between Dain Rauscher and RBC should only proceed based on a well articulated strategy for the enhanced future prospects and growth of both firms.”

Weiser met again with two senior executives of Royal Bank in Minneapolis, on June 21. A group of senior officers from Dain came to Toronto on July 21 and July 26 to discuss their respective wealth management and capital markets businesses. Weiser then met with Royal Bank CEO John Cleghorn on August 4 for further discussions.

Dain Rauscher’s board of directors met on August 11, to discuss strategic alternatives, including a possible deal with the bank. Weiser also revealed that he had been contacted by a representative of the earlier offer from February, indicating that this unnamed firm would now be willing to make a higher offer than it was back in the winter.

After further conversations with this firm, discussions were again terminated. Dain and Royal continued to talk about a possible combined strategy, including “strategic opportunities that the combined firms could pursue in the European equity capital markets arena”. Final terms were negotiated and signed September 28.