(December 15) – “A new survey of the Street’s clients shows that Canadian investment dealers in the future are expected to either go big or go home,” writes Andrew willis in today’s Globe and Mail.
“With global trends now driving valuations of many large Canadian companies — particularity technology, telecommunications and resource plays — both corporations and institutional investors are saying that their investment dealers must look beyond the border.
“The risks of not making this leap are huge. A survey by Tempest Consulting, a British-based outfit that specializes in brokerage firm consulting, and Reuters news service shows that the globalization trend is pushing the Street’s best clients toward the research products and services of the major U.S. and European shops.
“Gregor Bamert, a Tempest vice-president who was in Toronto for today’s release of the survey at a Royal York Hotel luncheon, said Canadian dealers must choose between three paths to cope with what’s coming. ‘Canadian dealers can maintain the status quo, and risk being marginalized, become global industry specialists, or choose to merge or sell out.’
“Tempest’s message isn’t news for Canadian dealers. In the 1990s, CIBC World Markets was the first to embrace a continental philosophy by building a platform in New York. Subsequently, rivals Scotia Capital, TD Securities, Nesbitt Burns and RBC Dominion Securities have all expanded internationally, with varying degrees of success.
“At the same time that the Canadians are expanding, foreign dealers have been making steady inroads into the domestic market.
“The problem Canadian firms face as they build globally is making money in foreign lands. Nesbitt Burns made an opportunistic (read inexpensive) acquisition of a Chicago-based team of former Duff & Phelps analysts in 1996.
“But the dealer subsequently let many of these analysts go. The problem was the sectors they covered, such as health care, weren’t specialities of the parent firm and didn’t attract profitable amounts of corporate finance or institutional traffic.