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Globe and Mail
2 days ago
- Business
- Globe and Mail
What industry consolidation can teach advisors about their own succession planning and firm value
Succession planning has long been the Achilles' heel of the wealth management industry. Some studies suggest that 80 to 90 per cent of advisors have no formal succession plan – a startling gap for a profession built on planning for others. At the same time, the industry is experiencing an unprecedented wave of consolidation. The result? A perfect storm of capital, urgency and opportunity. Two recent transactions capture this moment: Bank of Montreal's acquisition of Burgundy Asset Management Ltd. and Sagard Private Equity Canada's take-private of Lorne Park Capital Partners Inc. (also known as Bellwether Investment Management). These are more than headline-grabbing deals. They reflect a profound shift in how value is being defined and who's best positioned to capture it. A feeding frenzy is underway in the Canadian wealth management space. Banks, independent dealers, private equity firms and consolidators are seeking exposure to high-margin, recurring, fee-based revenue. The demographics are on their side: more than half of Canadian financial advisors are over the age of 50, with succession planning looming large. But while capital is abundant, high-quality platforms are not. That's why deals like Burgundy and Lorne Park matter. They're not just M&A transactions – they're signals to the rest of the market about what gets rewarded. In Burgundy's case, the co-founders were remarkably candid. In an email to clients shortly after the sale announcement, Tony Arrell explained that their original intention had been to transition ownership internally. However, by the time they considered it seriously, the opportunity had passed: employees lacked the capital to fund a meaningful buyout, and the leadership was unwilling to dilute their long-held value-investing principles to attract outside financing. In the end, BMO offered what internal succession could not: a culturally aligned partner, liquidity through publicly traded stock, and a structure that preserved Burgundy's investment autonomy while ensuring long-term continuity for clients and staff. It's a story many founders know too well: they want to keep ownership 'in the family,' but the financial, operational and leadership handoff is rarely achievable without compromise. For firms that don't have Burgundy's scale or brand equity, it's even harder. Ask most advisors what their practice is worth and you'll hear a familiar refrain: two to three times trailing revenue. The widely accepted industry rule of thumb implies a 2- to 3-per-cent price relative to assets under management (AUM), assuming a 1 per cent average fee rate. But here's the catch. Burgundy, a firm with $27-billion in AUM, just traded at 2.3 per cent, while Lorne Park, with $3.9-billion in AUM, traded at 3.9 per cent of AUM. These are full-firm transactions with sophisticated infrastructure and recognizable brands. So, why would a large wealth management firm pay an advisor 3 per cent of AUM to buy their book when other firms are only trading at 2 to 3 per cent? The truth is, they might. But it won't be because of an advisor's revenue multiple – it will be because of earnings before interest, tax, depreciation and amortization (EBITDA). Buyers are focused on what your business earns, not just what it brings in. If your practice generates strong margins, recurring cash flow, and has low advisor/key-person risk, it might justify a premium. If it doesn't, even 2 per cent of AUM may be a stretch. Firms with strong EBITDA margins, scalable operations and sticky client relationships are trading at 10 to 15 times EBITDA even if the AUM multiple looks modest. But for those running a lifestyle practice, in which profits are drawn down annually and the business revolves around a single advisor, then even a two-times revenue multiple may be generous. If you're an advisor or firm principal considering the next chapter – be it succession, retirement or recapitalization – now is the time to understand how buyers are evaluating value. Multiples are a starting point, not a finish line. The Canadian wealth industry is entering its next phase. Buyers are sitting on the sidelines, ready to act. However, value creation and capture belong to those who look beyond the headline metrics and focus on building enduring, cash-generating businesses. The lesson from Burgundy is simple. Succession is not optional; it's a matter of timing. The difference is whether you drive the process or respond to it. Joe Millott is a partner at Fort Capital Partners, an independent investment bank that specializes in wealth and asset management mergers and acquisitions, with offices in Vancouver, Calgary and Toronto.
Globe and Mail
23-06-2025
- Business
- Globe and Mail
Burgundy founders wanted to stay independent, but they made two mistakes
The founders of Burgundy Asset Management Ltd. never wanted to sell the business they built over 35 years to a bank. To his credit, Burgundy chairman and co-founder Tony Arrell admitted as much to clients last week. In an e-mail, he told some of the country's wealthiest families in the country that the founders' first choice would have been to pass their stakes in Burgundy to colleagues. This revelation came as Mr. Arrell unveiled what amounted to his only other option, a $625-million sale to Bank of Montreal BMO-T. 'In large part due to Burgundy's success, we have found it more difficult than expected to transition ownership of Burgundy from the founders and current leadership to the next generation of our people,' Mr. Arrell said in a note sent last Thursday, as BMO announced the purchase. Mr. Arrell and other long-time Burgundy employees made two strategic mistakes that cost the firm its independence, offering lessons in succession to any entrepreneur-owned businesses. Bank of Montreal boosts wealth management business with $625-million Burgundy deal The founders failed to share ownership early and often in their careers, making it increasingly expensive for that next generation to borrow the money needed to buy them out. While Burgundy is private, industry sources said Mr. Arrell, co-founder Richard Rooney, chief executive officer Robert Sankey and a handful of senior executives own the majority of the company. More importantly, Burgundy remained stubbornly committed to a value-focused equity investment strategy that attracted $27-billion in client assets. If this was the ice cream business, Burgundy tried to compete by selling only vanilla when rivals took the Baskin-Robbins approach by offering 31 flavours. Burgundy's mantra is buy great companies for less than they are worth and hold them for the long term. But embracing value investing in recent years meant missing out on growth stocks such as the 'Magnificent Seven' U.S. tech companies that drove market performance. Burgundy also steered clear of alternative assets, such as private equity and private credit, which have become an increasingly significant part of wealthy investors' portfolios. For a sense of what might have been at Burgundy, look at independent asset manager Connor, Clark & Lunn Financial Group Ltd. It started from the same place as Burgundy. The founders – Gerry Connor, John Clark and Larry Lunn – gracefully exited a generation back. CC&L, launched in 1982, lapped its rival by getting succession right and offering a range of stock, bond, real estate and alternative-asset strategies. In 2002, when assets were $14-billion, CC&L began to partner with smaller, specialized fund mangers, paying for ownership by issuing CC&L shares, and keeping teams in place. The firm, now moving to its third generation of owners, oversees $150-billion of assets under 15 brands. CC&L's secret sauce consists of sharing the wealth and embracing a variety of investment approaches. Both ingredients were missing at Burgundy. Once Burgundy is in the BMO family – the purchase is expected to close by the end of the year – its equity funds will be one more flavour on a bank-built menu that puts Baskin-Robbins to shame. BMO's wealth management platform has $423-billion of assets. Over time, this acquisition will pay off for BMO as Burgundy's financial advisers start selling the bank's other investment products to their high-net-worth clients. Succession is never easy to manage in a consolidating asset management industry. Numerous founders cashed in by taking firms public, then enjoyed a second payday by selling to larger players. The principal players at Gluskin Sheff + Associates Inc, Trimark Financial Corp. and Mackenzie Financial Corp. all followed this script. It is no coincidence that families or founders control three publicly-traded fund managers –AGF Management Ltd., IGM Financial Inc. and Fiera Capital Corp. – who have chosen to be diners, not dinner, by acquiring rivals. Burgundy's sale is a major wealth-creation event for Mr. Arrell and his family foundation, but bittersweet. This is an executive who played senior roles at a trio of independent investment banks – Gardiner Watson, Wood Gundy and Midland Walwyn – before starting Burgundy. He spent a 55-year career avoiding working for the banks that now dominate Bay Street. The decision to sell Burgundy to BMO came after 'long study and much discussion‚' Mr. Arrell said in his e-mail to clients. Sharing ownership earlier in Burgundy's evolution and embracing a variety of investment styles could have meant a different conclusion to those discussions.
Yahoo
20-06-2025
- Business
- Yahoo
BMO to acquire Burgundy Asset Management for $456m
BMO has agreed to acquire Toronto-headquartered Burgundy Asset Management for approximately C$625m ($456.2m) The acquisition aims to enhance BMO Wealth Management's offerings in the Canadian Investment Counsel space, targeting high-net-worth and ultra-high-net-worth clients. Burgundy, an independent wealth manager, managed around C$27bn in assets as of 31 May 2025. The deal consideration of C$625m will be paid in BMO common shares, with a $125m holdback contingent on Burgundy maintaining certain assets under management 18 months post-closing. It also includes an earn-out element, depending on the fulfilment of future growth targets. The deal is slated for completion by the end of 2025, contingent on regulatory approvals and other standard closing conditions. Upon completion, Burgundy will operate under BMO Wealth Management, remaining under the leadership of its existing CEO, Robert Sankey. Co-founders Tony Arrell and Richard Rooney will continue their roles within the organisation. Established in 1990, Burgundy employs 150 staff members and caters to clients from its offices in Toronto, Vancouver, and Montreal. KMS Capital, Origin Merchant Partners, and PJT Partners were financial advisors to Burgundy, while Torys provided legal counsel. BMO Capital Markets served as BMO's exclusive financial advisor, with Osler, Hoskin & Harcourt acting as legal counsel. BMO Financial Group group head of wealth management Deland Kamanga said: 'Burgundy Asset Management is one of Canada's most respected independent investment managers known for its high calibre team, rigorous investment process and dedicated service to private clients, institutions and family offices. 'The acquisition will build on BMO's heritage as a client-focused wealth manager while expanding our wealth advice and private investment counsel offering.' Burgundy chairman and co-founder Tony Arrell said: 'It has always been our intention to build Burgundy for the long run, so we can serve our clients and their families across generations. 'We are happy to be joining BMO, a North American leader, and believe this is a great opportunity to continue to serve our clients well into the future.' In March 2024, BMO Global Asset Management partnered with Carlyle to offer a globally diversified private equity portfolio, marking its third agreement to increase private markets' availability for Canadian accredited investors. BMO GAM will provide evergreen and closed-end funds to these investors through offering memorandums. "BMO to acquire Burgundy Asset Management for $456m " was originally created and published by Private Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
CTV News
19-06-2025
- Business
- CTV News
BMO acquires independent asset manager Burgundy for $625 million
BNN Bloomberg is Canada's definitive source for business news dedicated exclusively to helping Canadians invest and build their businesses. Sorry, we're having trouble with this video. Please try again later. [5006/404] BMO Financial Group announced Thursday that it is buying Burgundy Asset Management Ltd., a Toronto-based private investment firm, for approximately $625 million in shares. In a news release, BMO called Burgundy a 'leading independent wealth manager' that provides 'discretionary investment management' for its clients, which include private individuals, foundations and endowments. Burgundy will become part of BMO's wealth management unit, strengthening its reach into the Canadian investment space catering to 'high-net-worth and ultra-high-net-worth clients,' the bank said. As of May 31, Burgundy had approximately $27 billion in assets under management, according to the release. The company, founded in 1990, has 150 employees with offices in Toronto, Vancouver and Montreal. 'Burgundy Asset Management is one of Canada's most respected independent investment managers known for its high calibre team, rigorous investment process and dedicated service to private clients, institutions and family offices,' Deland Kamanga, group head of wealth management at BMO, said in the release. 'The acquisition will build on BMO's heritage as a client-focused wealth manager while expanding our wealth advice and private investment counsel offering.' Burgundy's current chief executive, Robert Sankey, will continue to lead the business going forward, and co-founders Tony Arrell and Richard Rooney will also remain with the company, BMO said. 'It has always been our intention to build Burgundy for the long run, so we can serve our clients and their families across generations,' Arrell, who also serves as chairman of Burgundy, said in the release. 'We are happy to be joining BMO, a North American leader, and believe this is a great opportunity to continue to serve our clients well into the future.'
Bloomberg
19-06-2025
- Business
- Bloomberg
Bank of Montreal Buys Burgundy Asset to Boost Wealth Business
Bank of Montreal is buying Burgundy Asset Management Ltd., bolstering its wealth management unit by adding an established Canadian firm that manages money for affluent individuals, pensions and foundations. The bank will pay C$625 million ($456 million) in shares, with 20% of that amount conditional on Burgundy maintaining a minimum level of assets under management for 18 months after the deal closes.
