Toronto-based GMP Capital Inc. has agreed to an all-stock deal to acquire the shares in Richardson GMP Ltd. that it doesn’t already own as the company focuses on high-net-worth wealth management.
GMP sold the bulk of its capital markets business last year to St. Louis, Mo.-based Stifel Financial Corp. in a $70-million cash deal. That sale and Wednesday’s deal allow the firm to focus on what it sees as the more lucrative wealth management channel.
GMP Capital president and CEO Kish Kapoor expects the $4.3-trillion Canadian wealth management space to grow to more than $7 trillion by 2028, creating room for independents to compete with the big banks.
“We think we have a significant opportunity to get more than our fair share of that market,” he said in an interview.
Richardson GMP has 162 advisor teams serving over 33,000 high-net-worth families and businesses. The deal boosts the company’s balance sheet as it looks to grow, Kapoor said.
The release announcing the deal said GMP had about $131 million in working capital as of Dec. 31. Richardson GMP had another $37 million, though Richardson GMP will allocate $36 million toward a retention program for its existing advisors.
Richardson GMP president and CEO Andrew Marsh said top advisor teams will receive recognition bonuses when the deal closes, which is expected to happen in the second quarter of this year.
Advisors representing more than 75% of Richardson GMP’s assets under administration have indicated written support for the deal. On Wednesday the firm didn’t say how many advisors that includes.
“Some people are away on holidays; some people want to talk to their team members,” Kapoor said. “Over the next week or so, we should have a much higher number.”
Marsh said the firm hopes to keep everyone, but acknowledged the deal is “an inflection point, both for the firm and for some individuals.”
As for recruitment, Marsh said the firm will be looking at fit and book size rather than adding scale for the sake of it. Maintaining quality and a “culture that still feels like a firm where people know each others’ first names” is a priority.
Richardson GMP’s average practice size is currently around $170 million, Marsh said, and the goal over the next five years is to grow the average to $200 million.
“We’re looking for advisors that have achieved significant scale of assets in their own practice, and that are looking for a home that supports independent, unbiased, unconflicted advice to their clients,” he said.
Kapoor said the firm would emphasize the ownership structure, with advisors’ share at almost 30%.
“That’s a very big incentive for us to share all the upside with the talented group of people that work with us,” he said.
Richardson GMP Financial Group (RFGL), GMP’s largest shareholder with a 24.1% position before the transaction, will increase its position to 39.7% when the transaction closes. Existing GMP shareholders other than RFGL will hold 30.7% of the company and Richardson GMP advisors will hold 29.6%.
The firm is also planning to change its corporate name to align with the Richardson brand. Kapoor said more details will come when GMP Capital reports its quarterly earnings on Friday.
As of Dec. 31, the firm said its 162 advisor teams administered approximately $29 billion. That compares to 166 teams managing $27.4 billion on Dec. 31, 2018.
GMP has called a special meeting of common shareholders for April 21, 2020, to approve the Richardson GMP transaction.