Photographer: Ben Nelms/Bloomberg

BMO Sees Share Gains in U.S. Dealmaking After Best Year in 2016

  • Bank of Montreal ranked 22nd advising on U.S. deals last year
  • Firm in ‘sweet spot’ between boutiques and bulge-bracket banks

Bank of Montreal expects to capture a bigger share of U.S. dealmaking in 2017 by winning more mandates for advising on takeovers and managing stock sales, building off its most successful year in U.S. capital markets.

“In a challenging year in ’16 we managed to take market share,” Peter Myers, 57, head of U.S. investment and corporate banking, said in a phone interview from New York. “It’s our expectation that we will continue to take market share into the future as we continue to hone our business plan."

The Canadian lender’s efforts to expand its BMO Capital Markets U.S. operations began in earnest when the firm acquired New York boutique investment bank Gerard Klauer Mattison & Co. in 2003. It scooped up talent from big U.S.-based banks in the wake of the 2008 financial crisis and last year acquired Minneapolis-based advisory firm Greene Holcomb Fisher, adding about 30 investment bankers. In recent years, BMO has climbed the ranks of U.S. dealmaking, approaching levels attained by Royal Bank of Canada’s RBC Capital Markets.

‘Strategic Choice’

“Our decision to invest in the U.S. has been a consistent strategic choice for BMO for a long time and it continues to be where we see the most opportunity,” Perry Hoffmeister, 50, head of global investment and corporate banking, said in a phone interview from New York. “Our U.S. platform is going to deliver growth, especially in the next couple of years.”

BMO Capital Markets is the Toronto-based bank’s biggest business after Canadian personal-and-commercial banking and accounts for about 27 percent of overall annual profit, according to financial statements. In the U.S., the lender has seen revenue from capital markets rise since 2011, the records show.

The firm reported C$1.54 billion ($1.16 billion) in revenue from its U.S. capital markets business in fiscal 2016, compared with C$1.38 billion in 2015 and C$1.26 billion in 2014. U.S. corporate lending also surged, with average net loans climbing to $15.1 billion for the year from $11 billion in 2015 and $9.55 billion in 2014, according to filings.

Middle-Market Focus

The U.S. unit focuses on companies with market values of $200 million to $5 billion in seven areas: industrials; food, consumer and retail; financial institutions; real estate; technology and business services; energy; and health care. The firm has more than 900 capital markets employees in 11 U.S. cities, with primary offices in New York and Chicago.

“The U.S. is the most competitive financial-services market there is,” Sumit Malhotra, an analyst with Scotia Capital, said in a phone interview. “With the exception of Royal, BMO has been the bank that has been the most willing to grow their capital markets franchise outside Canada, particularly in the U.S.”

BMO Capital Markets ranked 22nd for advising on U.S. takeovers last year, with a 3.7 percent market share and $69 billion of announced deals, according to data compiled by Bloomberg. That’s the firm’s best ranking ever, and is up from 26th in 2015, when it had 1.6 percent market share and $31.8 billion of transactions.

Enbridge Deal

Among the biggest deals the firm advised on last year were Spectra Energy Corp.’s $42.8 billion takeover by Enbridge Inc. and chipmaker Broadcom Ltd.’s $5.55 billion bid to buy Brocade Communications Systems Inc., according to the data. Chipmaker Microsemi Corp. also hired the bank to run a broader auction after receiving takeover interest last year from Skyworks Solutions Inc., according to people familiar with the matter.

BMO Capital Markets also improved in U.S. equity offering rankings, jumping five spots to 13th after arranging 40 stock sales valued at $2.5 billion and taking about 1.4 percent market share, the data show. In 2015, BMO ranked 18th with 0.9 percent market share. Before 2012 the firm had never cracked the top 20, according to data going back to 1999. The firm also ranked 16th in U.S. leveraged loans, a category where it has held a top 20 position since 2007.

The company sees itself filling the gap between so-called bulge-bracket banks less willing to pursue smaller deals and boutique firms that don’t offer a full range of investment-banking services, Hoffmeister said.

“The markets are in our favor,” Hoffmeister said. “Bulge bracket firms are giving up share, the global dealers are retrenching and the boutiques don’t have the capacity to fully service the needs of all the clients are increasingly distracted by regulatory pressures. We’re in the sweet spot of all of that."

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