In one fell swoop, Manu-life Financial Corp. has become a serious player in Canada’s wealth-management business.
The Waterloo, Ont.-based company has won a lengthy bidding war for Berkshire-TWC Financial Group Inc. , ending widespread speculation about which company would pick up the Burlington, Ont.-based Berkshire, reportedly put on the block by majority shareholder Michael Lee-Chin two years ago.
The acquisition of Canada’s largest independent, privately owned financial planning and wealth- management organization doubles the size of Manulife’s distribution network and triples its assets under administration in that business.
“Berkshire is a natural fit for Manulife,” says Roy Firth, executive vice president of individual wealth management with Manulife in Toronto. “Both companies have a strong base of independent advisors across Canada.
“This proposed transaction will be a significant boost to Manulife’s wealth-management business in Canada,” he adds, “particularly as Berkshire brings top-quality independent advisors to our team, top-quality systems, plus products available through its membership in the Investment Dealers Association of Canada and the Mutual Fund Dealers Association of Canada.”
Firth says Manulife has an excellent opportunity to broaden its position significantly in the wealth-management sector while giving Berkshire’s clients and advisors access to Manulife’s entire shelf of insurance, wealth-management and banking products and services.
The combined entity will have a sales force of 1,500 independent advisors across Canada and about $19 billion in AUA. Firth says the increased distribution capacity will add a significant amount of “high quality” business to Manulife’s Canadian operations.
The deal, the price of which was not disclosed, is expected to close by the end of August.
It’s too early to talk about what the new entity will be called, Firth says, or whether Berkshire advisors — and their books — will remain with the merged entity. Manulife’s main focus for the time being is to complete the transaction.
“It continues to be business as usual for both companies, which remain competitors [until the deal closes],” he says.
Dan Richards, president of Strategic Imperatives Ltd. , a Toronto-based consulting firm to Canada’s financial services industry, says the Berkshire bidding ended as he expected.
“Manulife, because of the synergies available to it, was the logical financial and strategic buyer,” Richards says. “To become a significant player in the dealership business, it needed to add substantial scale. It also wanted to get an IDA platform. Acquiring Berkshire did that. It filled a couple of important holes.”
Richards expects the news will be well received by Berkshire advisors, a good number of whom had become frustrated with their company’s refusal to follow through on several investments its management had said it was going to make.
“Now they’re with a firm that has the ability to invest in a way that Berkshire didn’t,” Richards says. “Of all the potential buyers, Manulife is the only one with a recognized brand.”
Berk-shire advisors have been asked not to discuss the merger until the deal closes. But one Toronto-based advisor at Berkshire, who requested anonymity, says he and many of his colleagues are excited about the future.
“Nobody that I’ve talked to sees any downside to it,” he says. “It’s a great fit, a great independent choice for consumers and a great independent choice for advisors.”
Lee-Chin, the Jamaican-born billionaire who formed Berkshire in 1986, will continue to be a “significant equity holder” in the new company, says Stephen Clarke, vice president of marketing and sales support at Berkshire.
Clarke says Manulife was attracted to Berkshire’s experience in operating successful IDA and MFDA platforms.
Berkshire, a distributor of mutual funds, stocks, bonds, RRSPs, RRIFs, margin accounts and specialty products, has more than 700 advisers, 237 branches and more than $13 billion in AUA.
Manulife was a latecomer to the bidding party; but once it got there, it made its presence felt, according to Clarke.
“It dedicated its immense resources to pursuing us,” Clarke says. “This commitment to the process, the striking similarities in our philosophies and belief systems, and our commitment to the independent advisor are what led us to select Manulife over the other contenders.
“Manulife has an incredibly strong and respected brand,” he adds. “These qualities, along with dealing with a firm that epitomizes strength and stability, was a top priority for our advisors.”
About a half-dozen companies took serious runs at Berkshire over the past few months, including Winnipeg-based Wellington West Capital Inc.; HSBC Securities (Canada) Inc., Bank of Nova Scotia, Raymond James Ltd., CI Financial Income Fund and DundeeWealth Inc., all of Toronto; and Montreal-based Power Corp.
@page_break@Although several suitors complained the bidding process was a lengthy and drawn-out affair, in Manulife’s view, it was “professionally handled and undertaken in an appropriately timely fashion,” Firth says.
Clarke says that Berkshire, as a profitable company, was in the “enviable position” of being able to take its time with its due diligence.
“We felt no need to hasten the process,” he says. “We owed it to our advisors, clients and staff to make the best decision possible.”
Richards says there will be the inevitable fallout with such a transaction; a rule of thumb is 10% of AUA won’t make the move to the acquiring firm.
Now that Berkshire is off the market, Richards expects the moving and shaking to settle down for the foreseeable future.
“All of the logical firms that are going to be sold have been sold, and all of the logical firms wanting to buy have bought,” he says. “The fund industry went through a spate of acquisitions and then quieted down when there wasn’t anything interesting to buy. The same thing will be true of the dealer community.”
That doesn’t mean Manulife is getting off the acquisition trail, according to Firth.
“We continually review market possibilities and are known as a very disciplined acquisitor in Canada and elsewhere,” he says.
Berkshire is joining a company serving millions of customers in 19 countries around the world. It operates as Manulife Financial Corp. in Canada and Asia, and primarily through John Hancock Life Insurance Co. in the U.S.
Total assets under management at Manulife are more than $426 billion. IE
Manulife adds to wealth management, big time
Acquisition of Berkshire-TWC Financial Group boosts Manulife’s distribution network and triples its assets under administration
- By: Geoff Kirbyson
- July 31, 2007 July 31, 2007
- 09:39