The failed bid from a Canaccord Genuity Group Inc. management-led group to take the firm private hasn’t hurt recruitment in the Canadian wealth management business, president and CEO Dan Daviau said Monday, though the number of advisory teams has dipped slightly.
“You would have thought, on its face, maybe some of the uncertainty would hurt recruiting,” said Daviau, speaking on a conference call to discuss the financial services firm’s fourth quarter earnings.
Recruiting in bad markets is also difficult, he noted, as advisors typically don’t like to transition their books.
However, Daviau said the recruitment pipeline in Canadian wealth management is “as strong as it’s ever been.”
The firm reported it had 145 advisory teams in Canada as of March 31, down from 148 teams at the end of the previous quarter, before the management group launched its takeover bid on Jan. 9. On March 31, 2022, it had 146 advisory teams.
Last week, the management group led by Daviau and chairman David Kassie said it wouldn’t extend its $1.1-billion offer to take the company private beyond the June 13 deadline. An unrelated regulatory issue at one of its subsidiaries meant the deal wouldn’t be approved before an August funding deadline, the firm said, and its board had recommended shareholders reject the offer.
Daviau brushed aside concerns on Monday about morale at the firm following the failed take-private bid. Four board members who belonged to a special committee evaluating the offer resigned in March after they didn’t support management’s offer.
Daviau said one of the positive outcomes from the failed bid was the employee support. The initial bidding group included 50 people, he said, but another 150 colleagues offered formal support and roughly another 300 made expressions of interest.
“We had an incredible amount of support from the employee base,” Daviau said. “As a result, we’re going to continue to look at ways to improve employee ownership in the business as a public company.”
The chief executive acknowledged there was a downside to the time and energy spent on the failed offer. “There are lots of negatives too, including confusion . . . in the street,” he said.
Canaccord also said earnings were affected by costs associated with the management bid. A standstill agreement reached last week when the offer expired allowed for reimbursement of “certain reasonable expenses” for the management group.
Daviau didn’t provide more information about the regulatory issue that stood in the way of the deal but said it’s “not existential” to the business. However, it was clear the issue wouldn’t be resolved by the August financing deadline, he said, which is why the management team didn’t extend its offer.
“Extending would have just been an added cost, a waste of time and misleading the market,” Daviau said. “There was no reasonable probability of getting it done in that time frame.”
He said the firm discussed extending the financing agreement, but didn’t provide more detail about those discussions.
Canaccord reported a net loss of $7.2 million in the quarter, compared to net income of $56.3 million a year earlier.
Client assets in the global wealth management business totalled $96.2 billion, an increase of 0.2% from a year ago. Client assets for the North American business totalled $35.7 billion on March 31, down 5.8% from a year ago but up 2.8% from the previous quarter.