Canaccord buys UK based financial service firm Collins Stewart Hawkpoint

Canaccord has acquired businesses in Britain and Australia in the last two years as it tries to cash in on growth in wealth management and corporate finance businesses in Asia.

British and European financial companies are also consolidating as the industry gets squeezed by the European debt crisis and a slumping British economy.

Thursday’s deal will also improve Canaccord’s revenue “considerably” and will be materially and immediately beneficial to its bottom line, the company said.

“Combined, we’re building a stronger full-service investment bank that brings together the best of both firms and expands the global reach of our specialized expertise,” Canaccord president and CEO Paul Reynolds said on a conference call to discuss the deal.

Canaccord is offering 57.6 pence in cash and 0.07 of a Canaccord share for each share of the British firm. The offer, valued at about 96 pence per share, represents a 90% premium to Collins Stewart’s closing price on Wednesday.

The deal comes as European financial services firms and banks, hit hard by a credit freeze over the debt issues in the eurozone, struggle with falling incomes and undergo a wave of consolidation.

Reynolds said last month that the company was eyeing a number of potential takeover opportunities amid the turmoil on the capital markets on the worries about European sovereign debt and economic uncertainty.

Canaccord, which focuses on wealth management and global capital markets, is rapidly expanding into new markets around the world.

In August, Canaccord signed a deal to invest $41 million for a 50% stake in BGF Equities and the option to buy the rest of BGF in five years, which gave the company a presence in Australian and Hong Kong markets.

“Our new wealth management operations in the UK and Europe will be highly complementary to the wealth management operations we operate predominately in Canada, but also in Australia through Canaccord BGF,” Reynolds said Thursday.

Assets under management from the combined businesses of Canaccord and Collins Stewart would have been $28.2 billion as of June, up 20.5% from the period last year. And Canaccord believes they will only continue to grow under the new deal.

Canaccord stock was halted from trading on the Toronto Stock Exchange ahead of the announcement Thursday. After it resumed trading, Canaccord shares fell six per cent or 54 cents to $7.96 after earlier losing as much as 13%, suggesting some shareholders may not be happy about the price it is paying for Collins Stewart.

Meanwhile, Collins Stewart (LSE: CSHP) shares jumped 38 pence or 75% to 88.50 pence on the London Stock Exchange.

Collins Stewart Hawkpoint directors said they intend to unanimously recommend that shareholders vote in favour of the deal.

The firm has around 850 employees across its corporate advisory, corporate broking, securities and wealth management divisions.

Canaccord already has offices in the UK, as part of its global operations, but Reynolds said the acquisition helps to diversify its business in the UK and Europe.

“Probably more than anywhere else, we expect the earnings potential of Canaccord’s business in the UK and Europe to grow significantly,” he said.

The deal will more than double Canaccord’s earnings from securities and fixed income in the UK and revenue from its advisory business is expected to grow seven times, he added.

In the U.S., it will give Canaccord the benefit of scale, new accounts and product coverage and two new business segments in fixed income and international equities. In Asia, the deal gives it a platform to expand through access to the Singapore market and lisiting on the country’s exchange, Reynolds said.

While Canaccord said it will achieve many cost-saving synergies from the deal, the acquisition will also beef up some of its weaker segments.

Canaccord’s strength is financing and fundraising activities, while the majority of Collins Stewart revenue comes from securities and trading, Reynolds said.

When the deal closes, Canaccord will have operations in 12 countries and capabilities to list on 10 stock exchanges, he added.

Mark Brown, CEO of Collins Stewart Hawkpoint said combining the two businesses “makes perfect sense.”

“Both businesses are highly entrepreneurial and the cultural fit is good,” he said.

The deal, which requires approval from Collins Stewart Hawkpoint shareholders, is expected to close in the first quarter of 2012.

When the acquisition closes, Brown, will be appointed CEO of Canaccord Genuity Ltd. for its U.K, and European operations.