Here’s another sign that the financial crisis is behind us. Sceptre Investment Counsel Limited and Fiera Capital, Inc. have signed a definitive agreement to merge the two companies. The announcement may well be saying that resurgent Canadian companies have enough cash, credit and confidence to undertake such deals.
The new company will be named Fiera Sceptre. The merger will create a leading publicly traded, fast growing, independent money manager with $30 billion in assets under management.
To put that into perspective, the combined AUM is greater than the retail mutual fund assets of Dynamic ($26.7 billion) or Invesco Trimark ($26.3 billion) – although both of those firms have extensive AUM beyond their retail mutual fund operations.
Sceptre manages segregated and pooled fund portfolios for pension and other corporate savings plans, government sponsored funds, universities, unions, charitable foundations, endowments and reserve funds of insurers. It’s Private Asset Management Group provides individual investment management products including mutual funds and segregated account management.
Fiera’s clientele is made up of institutional investors, mutual funds, charitable organizations and private clients.
The two firms are an ideal fit for each other and together they will offer compelling benefits for clients and shareholders, says W. Ross Walker, chairman of the board of Sceptre. “This transaction is accretive to Sceptre’s earnings and leverages the strengths of both companies to create a significant player in the investment management sector.”
Jean-Guy Desjardins, chairman, CEO and CIO of Fiera Capital, won’t go into specifics but says synergies resulting from the merger are likely to be significant.
“The match between the two organizations is a very nice one (and) it’s a good fit. It’s one of those situations where two plus two equals six,” he says. “Yes, there will be synergies, but it’s too early for us to give you a general indication (as to) what they will be.
However, Desjardins is more forthcoming about the individual strengths of both companies and how they will complement each other.
“This transaction enhances the ability of both companies to deliver service and performance through the greater breadth and depth in product offerings and talent that it brings,” says Desjardins. “Fiera Sceptre brings best-in-class expertise and performance in complementary asset classes to our clients. Together, we offer our current and potential clients a track record of solid performance managing asset allocation and a wide range of equity, fixed income, and alternative investments.”
Both Desjardins and Walker agree that it’s the future growth of assets and returns that will make the marriage work.
“In the asset management business the key is how much money do you manage,” says Walker. “If we can grow the assets and, therefore, provide the margin and the profitability, and attract the right kind of people, (then) that would be the real key to drive the success of the ongoing company.”
“At Fiera, we look forward to working closely with the Sceptre team to continue producing strong investment results for our clients and growing earnings for our shareholders,” says Desjardins.
With individual strengths and very little overlapping areas, the merger is expected to be a relatively smooth transition.
“Fiera has a very high percentage of their assets in fixed income, (while) Sceptre has a very high percentage of its income from Canadian equities,” says Walker. “There are not a lot of people competing for the same positions in the organization. Almost all of the investment professionals will carry on managing the investments that they managed before, and their relationship with their clients will stay exactly the same.”
Perhaps one of the biggest challenges that still remain is the enterprise of rebranding the combined organization.
“There is no question we’re going to have to do some work on rebranding,” says Walker. “Fiera is well known in Quebec, but less well known in Ontario and West. We will have to rebrand the combined operation to optimize the strengths of Sceptre in Canadian equities and the strength of Fiera in fixed income and some other alternate and investment strategies.
Optimists may see the revival of merger activity in Canadian financial market as an indication that credit is flowing again, and the Canadian financial system is gradually returning to normal.
“I wouldn’t relate it directly to the financial crisis we’ve been through and the seizing up of the credit markets,” Walker says. “Both organizations have confidence in the Canadian economy, but the credit markets per se really have very little impact on what we are doing.”