On June 15, global financial giant Duff & Phelps Corp. announced its acquisition of Toronto-based financial advisory firm Cole & Partners, a move that marked its first foray into the Canadian market.
The global expansion is aimed at providing local expertise to its clients while taking advantage of the benefits of global scale and access to more than 1,000 professionals with technical and industry expertise.
Duff & Phelps is a major independent financial advisory and investment-banking firm. Its principle areas are valuation, transactions, financial restructuring, dispute, and taxation.
It was recently involved in the Lehman Brothers Holdings Inc. bankruptcy and was subcontracted by the congressional oversight committee that ran the Troubled Asset Relief Program in the wake of the financial crisis.
Cole & Partners caught the interest of the Duff & Phelps empire builders when they first turned their eyes northward two years ago.
The Toronto firm is known for its expertise in business valuation, financial litigation support, corporate financial advice, and forensic investigative accounting. It boasts of a diverse client base that ranges from large publicly traded companies to private businesses but has a particular focus on legal and accounting firms.
Cole & Partners now becomes the 25th office of Duff & Phelps worldwide. The U.S.-based company made the jump to global operations in 2005, when it acquired a firm that had offices in London, England, and Amsterdam.
In 2006, it started up offices in Paris and Munich, to be followed later by Tokyo and then Shanghai. In 2008, it expanded its Paris office and is now making its move into the Canadian market.
Marty Dauer, managing director at Duff & Phelps’ New York office, says that since the firm first expanded to become a global player, its new status has become a meaningful part of its identity.
“About two years ago, we started looking towards Canada. It’s the fastest-growing economy in the G7, and in terms of proximity, it’s an easy expansion for us. The economic benefits and the dynamics of the services we offer are comparable to Canada, so it’s a natural progression for us to leverage our expertise there.”
Dauer notes there were no impediments to the deal. “It was important that we did the acquisition in a way that fully integrated the business from an operations and human capital standpoint. It’s crucial that the mental attitude is fully aligned as well as the Cole & Partners’ incentives with overall firm incentives. We’ve done that with this deal.”
Greg Higgins, leader of Duff & Phelps’ dispute and legal management consulting practice, was actively involved in the merger talks by looking at the two firms’ services and seeing how they could integrate them, a process that covered the forensic side of Cole & Partners’ business. “Our culture is to be highly integrated,” he says.
Higgins recalls a couple of instances in which Duff & Phelps had ventured into the Canadian marketplace in the past. “Cases that start in a particular geography can expand to other countries,” he says.
“Many of our clients have subsidiaries in Canada or cross the border to venture into Canadian markets. Many players in the legal community have matters that cross the border.”
This growing dynamic prompted the move to acquire a local business. “Whether they are U.S.-based or European, clients want locally based resources,” Higgins says. “They want fine service in the location where they are operating. We always try to deliver to clients the service that will best serve their needs.”
Dauer notes that 35 to 40 per cent of Duff & Phelps’ clients are S&P 500 and Fortune 500 corporations with significant cross-border holdings.
“They are large multinational companies with operations and interests in Canada. In the past, we would service that work out of the U.S. or not bid on work there because we didn’t have the capability. The new office provides the conduit by which we can provide deeper representation and better knowledge-sharing.”
Dauer believes there’s a strong possibility of professionals going back and forth across the border with more people coming up to Canada than going down south.
“We have the ability to bring expanded expertise to the Canadian office or, if a matter needs significant resources, we can serve our Canadian clients that way,” he says. “That will be part of the synergy. We will work with the Canadian practice, giving support and industry or particular subject-matter expertise.”
Higgins also notes Duff & Phelps’ forensic capabilities are fairly consistent with the general competencies and skills of Cole & Partners.
“One of the things that is happening in fraud and forensics in the U.S. and Canada is firms using outside counsel for this sort of work. We offer legal management consulting services delivered to general counsel in corporations.
A corporation [can be] domiciled in the U.S. or Europe but may have general counsel within each country or operation.”
At the same time, Dauer points out there’s some work the staff in Canada can’t do. “We offer a much broader suite of services, and Cole & Partners will now be able to apply the Duff platform. Cole doesn’t do too much from an investment banking standpoint.”
In the meantime, once Cole & Partners takes on the Duff & Phelps name after a transition period, Dauer says the firm will be like a new name on Bay Street in terms of investment banking. “From a knowledge-sharing standpoint, we’ll help them operate and leverage our resources.”
But when asked if there are likely to be more Canadian offices, Dauer is cautiously optimistic. “Right now, we’re focused on this acquisition, but it is the springboard for Canada. Offices in Montreal or the Pacific northwest are possible. Primarily, it’s going to be a Canadian-based operation to tap into the Canadian market.”
So far, the merger is going well, according to Higgins. “It’s a great opportunity for us to grow our business in Canada and grow their business in Canada,” he says. “In a short time, we have integrated very quickly and have already seen great benefits to the merger.”