Canaccord Genuity Group Inc. (CF) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining the Canaccord Genuity webcast to discuss its proposed and rejected offer to acquire 100% of the outstanding securities of RF Capital Group, Inc. My name is Stephanie, and I will be your operator today. Before we get started, I would like to remind you all that today's presentation is being recorded and will be available for subsequent replay at www.cgyourpartnersingrowth.com. To ensure anonymity for outside participants, we have arranged for questions to be submitted in writing via the on24 platform. During the course of the webcast, we encourage you to submit questions through the Q&A widget on your dashboard. Submitted questions will be read aloud by myself as an independent moderator and answered by CG management. If you wish to expand the presentation display on your screens, you may do so by clicking on the enlarge icon in the top right corner of the slide window. Participants are encouraged to review the caution about forward-looking statements, including a description of factors and assumptions in the accompanying presentation or in Canaccord Genuity's MD&A, which is available on the company's Investor Relations website and also on sedar.com. Finally, we welcome you to submit your feedback, either by clicking the survey icon on your dashboard or through the pop-up window that will appear at the end of the presentation. And with that, it is my pleasure to introduce you our first speaker, Mr. Dan Daviau, President and Chief Executive Officer of Canaccord Genuity Group Inc.

Good morning, everyone. Thank you all for joining us today. For those of you who missed the operator introduction, I'm Dan Daviau, the President and CEO of Canaccord Genuity Group Inc. I'm joined by Stuart Raftus, President of Canaccord Genuity's Canadian Wealth Management division. In response to many questions and indications of interest that we received following the March 16 announcement of our proposed and rejected offer to acquire 100% of the outstanding shares of RF Capital Group, we wanted to host this information session to share our vision for the combined wealth management businesses and take your questions. I'd like to start by saying that we have tremendous respect for the leadership of RF Capital and the Richardson family and all employees of RF Capital. While many of you know us to be competitors, which we obviously are, we are also fellow independent financial services businesses with common goals. Over the years, we've joined forces to advocate for measures that promote a safe and vibrant capital marketplace for Canadian retail investors, and we can be proud of what we accomplished together. Today, Canaccord Genuity and Richardson Wealth are the largest and longest-standing independent wealth management businesses in our country. That said, we are disappointed that we've been unable to engage with RF Capital's Board of Directors and the Richardson family in a productive way in connection with our proposal. Importantly, it is our strong view that the minority shareholders should have been provided an opportunity to consider the proposal. RF Capital's Board of Directors did not meet their fiduciary obligation to consider the minority shareholders. The Board outright turned down our proposal with no meaningful engagement or even a discussion around terms or price. It would appear their minds were made up regardless of the proposal that we made. We feel strongly that our proposal represents the best opportunity to maximize value for RF Capital's minority shareholders, and that we can provide the optimal platform for Richardson Wealth Investment Advisors to achieve their growth objectives. We believe that our proposed offer of $2.30 per common share is fair. It represents a 31% premium to the closing price at the time of our proposal and it also aligns with the formal valuation of $2 to $2.55 per common share that was commissioned by RFC's Board of Directors in connection with the recently completed RGMP transaction. Richardson Wealth Investment Advisors sold their shares for consideration with headline value of $2.42 per share. Notwithstanding the strong performance of Richardson Wealth Investment Advisors, when looking at RF Capital's recent financial results and the fact that the company has not delivered meaningful growth in revenue or client assets for 5 years, we believe that it's unlikely that they will be able to realize that value in any reasonable time frame. Although RF Capital has disclosed that they have $40 million to invest in growing their wealth management business, we know from experience that it will take much more. Wealth management has been fundamental to Canaccord Genuity's strategy for several years. As a company, we've invested over $350 million in acquisitions, recruiting and technology to support the growth of our wealth management businesses in Canada, the U.K. and Crown Dependencies and Australia. Excluding significant items, our global wealth management businesses have earned pretax net income of over $90 million this fiscal year-to-date, and $39 million of this amount was contributed by our Canadian wealth business, which has $31 billion in AUA, roughly in the same size as Richardson Wealth. To put it simply, we believe that Richardson Wealth Advisors could grow their business and service their clients in a more effective way on Canaccord Genuity's platform. Combining our businesses would also result in substantial synergies and economies of scale while providing RF Capital shareholders, including the Richardson Wealth Investment Advisors an opportunity to participate in the ongoing success of Canaccord Genuity. Perhaps most importantly, we feel that the RF Capital team would find an excellent cultural fit with Canaccord Genuity. We have an agile and supportive management team that supports advisers and doing excellent work for their clients regardless of their value proposition. The best person to expand on this is the one responsible for reshaping our Canadian wealth management business into the successful and growing platform that we have today. With that, I'll turn things over to Stuart Raftus.

Thanks, Dan, and thanks to all of you for joining us today. What I thought I would do is just take a moment and walk you through who Canaccord Genuity is globally. I know that all of you are familiar with who Canaccord Genuity is in Canada, publicly traded company on the TSX, but it's a much broader firm than that. So I'll give you a sense of who Canaccord Genuity is and then I'll tie it back into the Canadian wealth management business. So globally, we have about 2,300 employees. We have a very large wealth management business in the U.K., which is headquartered in London and it has 3 offices offshore, where we run a wealth management business offshore in Guernsey, Jersey and the Isle of Man. And in Canadian dollars, they manage roughly CAD 50 billion of AUA. Also in the U.K., we have a very boutique styled capital markets business that we spent the last number of years just rightsizing that to how it fits into our overall global footprint. In the U.S., we have a capital markets business, fully integrated with sales, trading, research, investment banking and M&A, and they focus primarily on healthcare, technology and sustainability. And then we move to Australia, which is sort of a mini Canada in many ways. We have a very nice capital markets business there, fully integrated, specializing in small mid-cap companies. And recently, we bought a wealth management business, Patersons, which was a 104-year-old wealth management company. And the integration between the wealth management capital markets business there has been very, very successful, and they have about $4 billion -- $4 billion to $5 billion of AUA there. So that brings me into Canada and the Canadian wealth management business. So all of you are going to be much more familiar with who Canaccord Genuity is in Canada. Our capital markets business is a very, very active capital markets business here in Canada. Last year, as many of you would know, we were the #1 investment bank in many of the tables. And our wealth management business collaborates very, very closely with our capital markets business. So the wealth business in Canada, very similar to your business. We have just over $31 billion of AUA. That gives us an average per investment adviser team of just over $220 million. And it's a business that we completely redesigned 5 years ago -- 5, 6 years ago. And one of the decisions that we made was really away from where the industry was going at the time, which many firms, independents and banks were all pushing the transactional business away. We looked at the transactional business and discovered that really for high net worth investors, that transactional style business, if done by the right investment adviser, can add a tremendous amount of value to that relationship. So we actually invested in and continue to grow our transactional business. The bread and butter of the business is really our portfolio -- discretionary portfolio management business. Pretty well -- all of the investment advisers that we have recruited over the last 4.5 years are all pretty well discretionary portfolio managers, and some of them run a hybrid business. But definitely some of the best of the best investment advisers across the country. We've welcomed 45 investment adviser teams over the last 4 years, 4.5 years, and they represent $11 billion of AUA. So a nice average per advisory team there as well. And we've also been able to attract the #1 cash management team in the country. So what you have is a business model where we're really agnostic as to the style of business. As long as you're adding true value to the client relationship, that's really what's key. And we've built out the platform so that we can support transactional business in the highest, highest degree, portfolio management business and cash management business. And it really speaks to just the entrepreneurial culture of the organization and how important collaboration is. So these advisers collaborate very closely together. They strategically team up from time to time in certain situations. And then, of course, the collaboration with the investment bank has been great for client referrals and just for effectively solving problems or issues for clients. And the global platform that I spoke to at the beginning of the call is really value-added to advisers that run large portfolios on a global basis. So when structuring a global portfolio, it's nice to have boots on the ground in Europe, in the U.S., in Australia, in Canada. And the flexibility and the flat structure of the company really encourages great communication. So it's one thing reading a report, it's a whole other thing when you can call somebody in the U.K., throughout Europe or down in Australia or in the U.S. to help you build out your portfolio, understanding the companies that you think you're going to populate those portfolios with. So the business in Canada has been -- has really grown very successfully. It's very profitable. And the profitability of the business really allows us to invest in the business. And I've always said, great things happen to profitable companies. And the profitability has allowed us to invest in systems like Envestnet that we rolled out right on time in November last year. We had targeted November a year before that as our launch date, and we delivered it on time, which was really important to our advisers, and it's really a best-in-class portfolio management UMA system, which adds tremendous amount of value to the investment adviser when they're structuring portfolios as well as the client experience when it comes to client reporting. And Envestnet, many of you may be aware of, it's the go-to best-in-class technology in the United States. They have just about $3.4 trillion, with a T, of assets on their program. There's only 1 bank in Canada that has that, and they are using about 20%, 25% of it because of legacy systems really don't allow them to be able to incorporate the whole platform. So we invested heavily in this, and it's proving to be a real game changer for us. We also believe investing heavily in marketing, practice management, wealth and estate planning is critical to the overall client experience. So we invest heavily there. And then we invested quite significantly in partnering up with Morgan Stanley, and that's now allowed us to have their research for all of our investment advisers. And as that partnership grows, we'll be looking to add in training programs and so on. So the overall business is run at a very flat management structure. Entrepreneurialism is a key component of the culture. And the management team in wealth is really focused on 3 things. I think it's important that management teams can be laser focused. So we're focused on retention, recruitment and asset growth. And if you think about all the things that have to go into retaining the very best of the best advisers, it's really the same ingredients that you need to recruit and attract people to your organization, and it's actually the same ingredients that you need to grow net new assets or attract new clients. So retention is critical. I don't think it can be accomplished by paying advisers to leave -- to stay, which many of the banks have done over the years. Paying an adviser really does nothing to the client experience. And so we're very, very focused on understanding what advisers need so that they can attract clients, attract net new assets and drive a very powerful client experience. And that's where we've invested a lot of time and energy and attention. We also believe recognition is really important. So we take our top advisers, our top decile of advisers go on our Chairman's Council each year, which is an international trip. And then our President's Club, which are our top quartile, we take them to a North American destination and really spend a lot of time just getting to know them and building relationships that we think is so critical to the retention of top talent within the organization. So -- and then obviously, you want to be able to grow your business through recruiting, but the recruiting process is really completely checked off by all the things we need to do to retain the best advisers. And much of that is platform and by investing in the platform, whether it be marketing and allowing people to use social media to really build out their business, all of that is going to attract either net new assets from existing clients because of the client experience or allow people through business development activities to grow their business. So that should hopefully give you a pretty good understanding of who we are as an organization, how we look at the business. We believe fundamentally that we're in the investment adviser business. And if we look after our investment advisers and help them grow their practices, they're going to be able to attract the type of high net worth clients and add true value to that relationship. So I hope that gives you a pretty broad overview of who we are globally and then specifically, who we are in Canada, both on the capital markets side and wealth management. And to bring it back into focus, the main focus of today's call, combining these 2 businesses, I think, just makes a tremendous amount of sense. You would end up creating the preeminent independent wealth management business in Canada. I think it's transformational for both companies. We've grown our wealth management business globally through acquisition. The integration has been very bespoke. It's been very focused on what's important to the company in Australia that we purchased or the companies that we bought in the U.K. We take a lot of time and attention to understand the cultures of the 2 organizations. And clearly, the heritage of Richardson's -- Richardson wealth is very important, and that's something that we would give a lot of time and attention to understanding the important drivers in that. And to me, this makes sense on so many different levels for each of you as individual investment advisers as well as driving the client experience. And so it makes sense for clients and shareholders as well. So with that, I really appreciate everybody taking the time today, and we're going to open up the line for questions that you may have for Dan Daviau or myself. So operator, maybe if you could please open the lines.

Okay. So Stuart, the first question that came in is, you've said that advisers and clients had a positive experience transferring to CG. Could you expand on what drove this?

Sure. Thanks for that. Look, I think it's a number of different things depending on the adviser that's joined the firm and their client base. But really what it comes down to is, we believe, in offering a very bespoke solution for clients. So everything is as much as possible, customized to the requirements, to the goals and objectives of the individual client. And so it really depends on the nature of the client relationship. But what we have seen is many advisers that have joined have been able to increase their share of wallet through added value into the relationship. And some advisers that would be different would be more just around freedom in how they're marketing their business. And I can think of an adviser that joined us in Winnipeg 2 years ago with a $230 million book that took them roughly 20 years to build. And now he's been here for 2 years and through his marketing campaign and how we've helped them leverage that, he's over $600 million now. So really, that ability to customize the client -- customized client solutions and help advisers leverage what they do best has really led to a much more positive client experience and an adviser experience.

Great. The next question that's come in says, I understand your grid is higher than our grid. Are you planning to keep it that way?

Well, that's surprising that an adviser would ask that. So yes, I do believe our grid is higher than the Richardson grid. And compensation is so critically important to the culture of an organization, to individual investment advisers. We're very comfortable with our grid and how it works. It's really built to ensure that there's no bias for different products or so on, and it really is designed to reward success. So without having a really deep understanding of what the Richardson grid looks like, understanding that ours is higher, yes, I would anticipate that we would leave it in place and look to grab the best components of each one if a new one was created.

Okay. The next question is, what would the escrow provision be for advisers who transfer to CG?

Yes. Stu, do you want to take that? Or do you want me to take that?

Dan, go ahead.

Listen, we're -- in a perfect world, we'll be having discussions with the RF Board and coming up with an intelligent answer that's a win-win for everybody. When we understand what's there, we think those escrow provisions have been a little harsh on advisers. We'd certainly try and figure out a way to get advisers better liquidity sooner than what's currently there. But clearly, there's some securities law aspects around that, that we'd have to think about and how we would adjust that escrow release. But certainly, from a good faith perspective, we would certainly try to at least give some liquidity sooner time than what's been contemplated. We're pretty confident that the combined platform will create an immense amount of value. And we think people will want to own the shares, not necessarily forced on them.

Great. Okay. The next one is why would Canaccord not have made a bid in advance of the RGMP-RF transaction?

Let me try that, Stu. And then if you got anything else, please feel free. I mean we did try to make a bid. We certainly were actively engaged in conversation with the -- at the time the GMP Board, to try and facilitate transaction. I think like the current situation, I don't -- to a certain degree, it feels like the Board's mind has been made up. We've tried to engage in the past in conversations. It's always been a very short or rushed dialogue. This one as well. This time, we chose to go public with it because we think it's important for the minority shareholders of RGMP or Richardson now, Richardson Financial, and the advisers who are minority shareholder to hear what we're trying to propose. So we've tried several times. It seems like there's a program in place that the Board is trying to execute and don't necessarily want things getting in the way of that. We'd be happy to engage in conversations, obviously.

Okay. The next question says, how did you arrive at a share offer of $2.30 when the initial valuation placed it higher in November, and that Richardson has higher AUM and revenue than in November?

Yes. The higher AUM in November. I mean things are always a function of future performance. Any valuation is a function of future performance. So we took the range that was put in place, the range that was put in place by RBC that -- we didn't hire RBC. The Board hired RBC to do that. It was $2 to $2.55. We picked the middle point and went slightly above that. Truth be told, the Board's never engaged with us on any pricing conversation. We've tried to engage with the Board on terms and pricing. We sent a letter in at $2.30. We published that letter, as you're aware. The Board's never engaged in the valuation discussion. This hasn't really been about valuation. This has really been about somebody that seems relatively fixed in their views and terms independent of the valuation discussion.

That's great. We've got a lot of questions coming in right now. Give me a second and I'll find one in the inbox. Here we go. Okay. We've got, the working capital of Richardson was severely impacted by a minority shareholder group that forced the buyback of outstanding shares. These shareholders were not able to sell all of their shares in the offer. Are they part of the minority shareholder group that Canaccord is making their case to?

Yes, there hasn't been an immense amount of liquidity in the stock since that buyback offer. That buyback offer was dramatically oversubscribed for. In other words, many more shares were tendered to that buyback offer at $2.40 or $2.42 that were required to be taken up. So some of those shareholders clearly continue to own stock. Our offer is for all shareholders, whether you're an adviser, whether you're a minority shareholder or quite frankly, the Richardson family. We'd love to figure out a way that the Richardson family would partner with us in this transaction, either by taking back stock or whatever. So yes, our offer is for all shareholders, if that's the question, if I understand it correctly.

Okay. We've got the next question. It says, I own 27,000 shares presently. And as a long time shareholder, I believe the current value is low, and should be, given the rise in Canaccord shares, $3.50 minimum. Presently, your offer is predatory.

All right. Yes. Listen, again, as I said, we're happy to talk about valuation. We earned $75 million last quarter. We earned $0.60 a share last quarter. We've already publicly announced that we're going to do better this quarter than we did last quarter. If you actually look at our valuation multiples at Canaccord, yes, our stock has gone up significantly over the last year as has other financial services stocks or brokerage, wealth management stocks. But we continue to be valued at an incredibly low price to earnings multiple or even a lower total enterprise value to TEB multiple. In fact, we make significant profit. Right now, Richardson Financial does not make significant profit. So we trade at a much lower multiple than where Richardson would trade at. So our offers gives us a fair amount of confidence that, in fact, you're getting a better value proposition, and there's more upside in a Canaccord share than there would be, for example, in a Richardson share, not only from the fact that earnings potential is greater, but the multiple appreciation on that earnings would be greater. So we're pretty confident people would make money. As I think you would know as a shareholder of Richardson, I mean post that buyback offer at $2.40, which most people tender to, maybe even you, that stock has never seen $2 and in fact, was $1.70 for most of the period. So we weren't trying to be predatory. In fact, we were trying to offer a pretty significant 30% premium to where the stock had traded at, but I appreciate your view. And certainly, we'd be happy to engage with the Board on a valuation conversation if it ever came up. We've never really been able to do that.

Okay. The next question is, how confident are you that you would be able to amalgamate the 2 firms well and not be too disruptive to the client?

Okay. Great question. Stuart, do you want to take that one?

Sure. Thanks, Dan. Look, I think we'd be highly confident in bringing these 2 businesses together. There are just so many similarities. And this is a people business. It's all about taking the time to understand what's important to the individual investment advisers, what's important to the individuals on their teams, frankly, all of the employees at both firms. And then what are the real drivers behind the client experience and ensuring that you have a deep understanding of that and then put a plan going forward. We've had a lot of experience in integrating firms in the U.K. as well as Australia, recently, a wealth management firm that I touched on in my opening remarks. And that integration, the amalgamation of that has gone very well. So it's all about understanding the people within both organizations. And then really narrowing in on, most importantly, the client experience and ensuring that, that's not disrupted. And then you should end up with a much powerful organization than what you started with.

Yes. I'm just adding to that. I mean we've done 6 transactions in the U.K. in terms of growing our U.K. wealth management platform. Stuart mentioned the transaction in Australia. We bought a company called Patersons. It was a 108-year-old firm, one of the oldest firms in Australia. That integration has gone phenomenally well, both from a client perspective and an adviser perspective. I don't want to say we're an expert at integrating firms, but it's really about picking the best talent to help you through that exercise and using the best players or the best pitchers in the bullpen now that baseball season started again to really kind of get to the right result. So it's a great question. Thank you.

Great. The next one says, many RF minority shareholders who are no longer active in the firm are caught up in escrow provisions. Would you propose to free up those shareholders?

Yes. That was part of the question that got asked a little bit earlier. Certainly, we wouldn't see the same need to have the same type of escrow that was imposed as part of the RGMP transaction when they merged the RGMP into GMP at the time to create Richardson Financial. So we'd certainly look at that escrow provision. Think about how we would get off that. Our stock is incredibly liquid stock. We wouldn't see the same need to keep unaffected shareholders who don't necessarily instrumental in the future value locked up as part of our proposal. I mean our stock trades, I'm making this up, but I'm not going to be too far off, $10 million a day of late. So we're a pretty liquid stock, and we wouldn't see the need for that type of escrow or certainly, shareholders who weren't also advisers and even for the adviser shareholders as I mentioned before, we've contemplated a little bit of enhanced liquidity in the exercise.

The next question is, what has been the response of the Richardson family interest to your offer?

I mean, listen, I've got a lot of respect for the Richardson family and for Hartley. I'm just not saying that because this is a public call. I honestly feel that. And they have a very strong attachment to the wealth management business, historically and otherwise. We haven't had material engagement. We've tried to engage with them on several opportunities in the past. To date, we have not had a material engagement. At the end of the day, the advisers are the assets of the business. That's the way a wealth management business is. We understand that. Stuart alluded to that in his presentation. In terms of what's really important, it's really important to have your advisers attached to the company. So what our hope is, is that the advisers will see the benefits of putting our companies together and ultimately, speak with the Richardsons and hopefully encourage them to understand the benefits of putting the 2 businesses together as well. So I mean that's part of the reason for this call today and part of the exercise. So to date, to answer the question directly is we have had limited engagement with the Richardson family on this. Not by our choice.

I've actually got a follow-up question to that. Are they willing to negotiate?

Yes. To date, not, but we are very willing to negotiate. That's for sure.

As a CF shareholder, I am concerned about the recent price action, especially today. Do you have any comments on this?

Yes. As a CF shareholder. Yes. So we had an anomaly on the price. However, I predict what's going to happen with our price, you should probably bet the other way. I mean there was just the index inclusion, and there's always anomalies around index inclusion. People speculate you're going in the index. A whole bunch of people, mainly hedge funds by stock in anticipation of index inclusion. And then when the actual index traders, the people that need to own your stock buy your stock, you kind of match up what the hedge funds bought and the people who own it and then there's sometimes a mismatch. And that's what it feels like happened this time, a little bit of a mismatch between what people had contemplated would be required for the index players and what was required. And I think we've seen a small anomaly in our stock price as a result. Financial stocks have been a little weak as well. That could have had an impact on it. I mean the long-term value proposition remains. We had record earnings last quarter. We've got a remarkably strong business going into this quarter. All the analysts have upgraded our earnings targets, plus they've upgraded their prices in the last 4 days. So there's just weird anomalies going on in the market. We also announced, as you're -- as some people may be aware, that we'd be buying back our convertible debenture. Again, we've been incredibly profitable, creating a fair amount of cash flow. We also just sold 20% -- or in the process of selling, we announced that we'd sold 20% of our U.K. wealth business for $200 million. So for $1 billion valuation. That, too, will give us a lot of excess cash. Some of that cash we're using to buy back our convertible debentures. So there could be some anomalies around trading our convertible debentures and our stock as a result. Those convertible debentures were convertible at $10 a share. So they were well in the money. In other words, just to bring down our share count and shareholder value. So difficult for me to answer the question. But yes, we have strived for a lot of stability in our stock and stability in our earnings. That's certainly part of our strategy in growing our wealth business, including what we're proposing here. So that's more of the same. So we think our stock will improve. We think as people start focusing on our earnings and the prospects of the business, our stock will improve. The stock went up pretty dramatically. It's down slightly. We're not particularly worried given the long-term vision we have for the business. But thank you for the question.

What is Canaccord's position on book ownership? Who owns the book?

Stuart, that's for you.

Yes. Look, it's the age-old question. And I think it's pretty obvious. As you see advisers from -- when they move from one firm to the next, clients decide who they want to stay with. And so I think that really points to who owns the book anyway. And we've, as I mentioned earlier on the call, welcomed 44 teams into the firm, with over $11 billion in assets, and they've all brought over at least 92%, 94% of their assets. So it's pretty clear to me who owns those client relationships. And other than from time to time, you'll see an investment adviser that's built their practice around bank referrals, and if they decide 1 day they want to move and they can't move their practice, it sort of tells me that maybe the bank really own those client relationships. So look, I think it really comes down to the client relationship, how strong the relationship is with the investment adviser, and that really dictates who controls that relationship and should they decide to move.

Why did you sell a portion of your U.K. wealth management business?

It sounds -- it's a great question. It sounds a little counterintuitive. We sold a portion of it to grow it. The valuations for U.K. wealth management firms are even in excess of where they are in North America. Our stock has, to a previous question that was asked, wasn't trading at a level that allowed us to continue to commit capital to growing that business. So we sold a relatively small part of it, 20% of our business. We still are an 80% shareholder of that business and very excited about the ongoing prospects in that business. So we partnered with somebody. We partnered with somebody that will have additional capital and is committed to additional capital to allow us to continue to consolidate the U.K. wealth management business and grow that business. At the end of the day, we're hopeful that the business will significantly grow and actually, our earnings from that business will increase. We own a smaller piece of a much larger pie, and that's certainly our plan there in that transaction. There was other benefits to it. It did tangibilize, that's not a word, but it did highlight the value of that business. We told people for a long time that, that business was worth a lot. And when you look at our overall market capitalization or our total enterprise value, I mean, if you want $1.5 billion or $1.6 billion, I mean, that business is worth $1 billion. They're valuing the rest of our business at $600 million. That's where 80% of our earnings come from. So at the end of the day, the stock continues to be -- our stock continues to be significantly undervalued. Notwithstanding, highlighting the value of that business. But there was a lot of reasons to look into it. The main one was to grow it.

How do you manage the potential reputational risk and compliance risk associated with transactional practices?

Great business. Stuart, you want to start that?

Sure. Thanks, Dan. Look, it really comes down to the expertise of the investment adviser and the suitability of the client. If you look at the Canadian market, it's a very active, small, mid-cap marketplace. Our investment bank has really become the investment bank of the Canadian entrepreneur and high net worth clients want to participate in these new companies. And it really comes down to, again, what I started with, which is suitability of the investments to the client and the expertise of the investment adviser. And we're very proud of the fact that we have some of the very best transactional-based investment advisers in the country that have a very specific clientele that are also -- that are sophisticated, they understand the risks and they're quite eager to participate in those type of investment opportunities, these early-stage investment opportunities. So I just -- again, just want to underscore, it really all comes down to suitability of the client, truly understanding the risks associated with the investment and then the expertise of the individual investment adviser.

Can you give us an idea of what the cost savings would be if the transaction were to happen?

Yes. I mean we've obviously done pretty sophisticated modeling. As sophisticated as you can do from the outside looking in, but we understand what it would cost us to run a business with an incremental $30 billion or $31 billion of assets. We've got a very sophisticated view. That business is roughly the same size as our business. So we've got a pretty sophisticated view. What we've told the investing public is that the transaction would be accretive to us. And given right now, and again, I'm not throwing stones, but given Richardson Financial does not make money, I mean, net income of 0 this year or a slight loss this year, the reason this is accretive to us is there's significant cost synergies as part of the transaction, whether those are leases or back office costs. It's clearly not the adviser's perspective. You've heard Stuart talk about the grid and which compensation is the major element of any expense in this exercise. So it is significant back office savings in the context of the transaction. And we believe, even on an all-share basis, the transaction will be accretive to our shareholders. What we haven't really modeled in and what -- in the back of our mind, we're excited about is the potential revenue synergies. Stuart's already alluded to the fact that most of the 14 -- all of the 14 advisers that have come over already from RF have done better than they were doing at RF from a revenue perspective. So that, number one, we expect advisers to do better. Number two, clearly establishing that dominance as the Canadian independent dominant wealth management firm and investment bank has synergies. And we've seen that. We are a stronger wealth management firm because we are attached to the strongest independent capital markets firm. And vice versa, our capital markets business is much stronger with cross referrals being attached to a very strong wealth management business. We really haven't modeled in those synergies. They are harder to do, harder to speculate on. But certainly, even from a cost perspective, we're comfortable that the transaction is accretive and would benefit our shareholders. Like some of the folks on the phone, we are large shareholders of our company, and we wouldn't be doing something if we didn't feel, ultimately, it would improve our stock price. The final thing I'd add in this is even with that accretion, as we have an increasing proportion of our earnings coming from wealth, we expect our multiple to improve, and that will even create further shareholder value. Great question, and thank you.

Will this proposal dilute the current CF shareholders?

By dilute, you mean if we're going to issue more shares, for sure, we will be issuing more shares, but it's not dilutive. We expect our earnings per share to increase as part of this transaction, not decrease. Sorry, operator, that's the end of that question.

Wonderful. Are you able to open -- are you open to offers to purchase shares of CF to unlock value for your shareholders?

Yes, sure. We're always open. Part of our strategy has been to deploy our capital more efficiently. We've just announced that we're buying back our convertible debt. That's 13 million shares outstanding. That's over 10% of our outstanding stock. We've done a substantial issuer bid in the past. We're active on our normal course issuer bid. And to the extent that we create excess earnings from our capital markets business, we intend to deploy that -- to continue to buy back stock. I think it'd be not prudent to do it at this time in a substantial way until we understand where this transaction is going. So we'd have to see how this plays out before we make any formal idea on that. But you've heard me say that we think our stock is undervalued, and you've heard me say that we have ample capital resources. So those 2 things typically mean that we'd end up buying back some stock here and there.

What is the rationale for paying 30% premium for RF Capital? If shares were used, would the deal not dilute the current Canaccord shareholders?

No. As I've said, we have modeled this business in a pretty sophisticated fashion at $2.30 per share. Quite frankly, we've modeled it at lower and higher stock prices. And again, we continue to believe that earnings per share will be higher after we do this deal than before we do this deal. In other words, it will be accretive to shareholders. Thank you. 30% premium is a pretty standard premium. If you looked at 100 M&A deals and you looked at the average premium, my bet it comes a couple of percentage points to 30%, one way or the other.

You've mentioned no value creation at Richardson for many years. Canaccord stock is at the same level it was 16 years ago. Does this sound like value creation to you?

Yes, I don't know. I've been the CEO for 5 years. The stock was $4.50 when I started and it touched $13 a couple of weeks ago. Listen, I can't speak to 16 years ago. It seems like a long time ago. The market has obviously gone through a significant transition. I certainly can speak to the last 5 years. In the last 5 years, we've taken our Canadian wealth business and increased assets from $8 billion to $30 billion. Again, the RF assets, again, through no fault of the advisers have been flat. We've taken our margin from a money-losing business to a business that's creating 15% net income margins. We've taken our average book from roughly $70 million to over $200 million, roughly the same size as the Richardson. And we've created an incredibly valuable U.K. wealth franchise as well as establishing ourselves as the dominant independent capital markets firm in Canada. So I think we've done a lot of value creation in the last 5 years. I think the market's reflected that, certainly, in the last year, the market's reflected that. And I think people generally see that. Wealth is fundamental to who we are. It's been fundamental since the day I assumed the seat and Stuart assumed his seat in the -- running our wealth business. So yes, happy to talk more. I'm happy to go in any detail that ultimately somebody wants. We did highlight some of those points, and we're happy to kind of put them in that micro site we've developed to try and show you the value creation we've done. But we've been very, very focused on value creation. We've been incredibly laser-like focused on how we create value for our shareholders. And the firm is 40-plus percent owned by its employees, including Stuart and myself and all the other senior people as well as a lot of people in the firm. And we think culturally, that idea of creating money and making a profitable business is how we create a better place. Really, the exercise has not been about value creation and how we make money, but culturally, how we've changed the organization, how we've changed the organization to a very professional organization, where our shareholders come first, our employees come first and our clients come first, not how you come first. And that's really culturally how we've changed the company and what's really resulted in how the business has performed better these days than how it's performed perhaps 16 years ago when I really can't speak to it. So a great question and sorry for a very, very long answer.

That's great. What could your next steps be? Should the RF Board continue to dodge the engagement of a reasonable bid or refusing to formally take the bid to its shareholders?

Yes, great question. I mean, again, I won't go into it in detail because when you play chess, you don't tell the other side where you're about to move. But we are looking at this as a bit of a chess game. And we certainly have a strategy in place. This is not a kicking the tire exercise. We are very, very focused on it. And this is not something we're going to let go of. So there's obviously a number of things to think about in the context of the transaction. The company has a shareholder meeting coming up, one where shareholders get to express their views, obviously. Advisers need to make their own individual decisions as well as corporate decisions. Shareholders need to make their decisions. So we have a number of different prospective scenarios. But this is one we're not kind of one-and-done on this. We're seriously thinking through a wide range of alternatives to ultimately engage. Our preferred route is to have a real engagement with the Richardson family. It's -- we like them. We'd love to figure out a way to engage with them and to have a real engagement with the RF Board. And that's really kind of where we're focused on primarily at this stage.

If RF Capital does not wish to negotiate and makes no indication that they will in the future, how long will you leave this proposition on the table?

I won't speculate that right now. As we say, it is our #1 strategic priority. That's why we came public with this. And we are going to intend to pursue this for the -- I'll say something that's meaningless, like the foreseeable future. It's not going to disappear next week, that I can tell you, but we probably also won't be at this in a year from now either. So there's a range that can drive 42 trucks through.

Okay. I think this will probably be our final question because we are mindful of the hour. Notwithstanding [ Harrison Kevin's ] culpability, given Don and Kish oversaw the fracturing of a capital markets group from its distribution arm, and then proceeded to butcher what many felt ought to have been the easiest deal to close in recent memory, the merger of GMP and RGMP, how would you rate their performance?

Okay. So I'm going to restate that question as opposed to making you reread it. So given that the last transaction didn't go so well, how would you rate their performance? And given what -- given that things didn't play out. Listen, when you start a very difficult partnership and an arrangement like what was contemplated originally between GMP and Richardson, you don't always plan for every possible scenario. And certainly, the GMP folks didn't plan for a scenario where their stock would be so beaten up that they couldn't really afford to integrate the business in. So hard to blame people. Looking back 10 years or 7 years and then figure out what went wrong. Clearly, there was some flawed execution there, probably some poor integration at the time. But I'm not here to throw stones at what happened 7 years ago. I think the transaction between Stifel when they sold their capital markets business and then did the -- tried later to do the wealth business, that's not how I would have done it as a practicing corporate finance professional. Typically, you would have tried to do all of that at once as opposed to let me see, I'll sell my capital markets business, hope my stock was -- try and merge it in with the wealth business. Hopefully, the values line up, which they didn't. And then you start creating artificial prices to try and do transactions. That wasn't the best execution of an M&A deal I've ever seen in my life. And I think that created a little bit of consternation and created some issues that I think are -- still left a bad taste in people's mouths. But listen, in the public markets, it's difficult. I mean at the end of the day, the RGMP Board and the Richardsons have chose to keep this company public, and I understand why they're doing that. But with public companies come complications and fiduciary obligations and minority shareholders and people with a voice. And I get that. If this business was private, we wouldn't be making an offer for this business, obviously, but it's not private, it's public, and 56% of it's owned by people other than 1 shareholder. So we certainly want to engage in an intelligent conversation to see how we take this thing forward. But like I said, at the end of the day, we're very excited about the prospects of combining the business. We like the Richardson Financial business. The advisers that we brought over have been fantastic partners, to a person, fantastic partners and to a person, they'll tell you, right they'll tell you that they love being part of our franchise, and they love being part of our firm. And that's clearly what we're hoping for all of the advisers at Richardson when they come over. We think it would be a perfect fit. We think everyone would be very happy, and we think it's an immense opportunity for a real win, win, win. A win for the Richardson shareholders, Richardson Financial shareholders, a win for our shareholders, a win for the advisers and most importantly, a win for all of your clients. So we're very excited by the prospects.

Okay. And then we have our final question. When you say the deal will be accretive, accretive in what time frame? First full quarter? First full year? If you could please elaborate.

Yes, I think you're asking if the deal will be accretive. Yes. I mean synergies. I won't answer the question to the detail that the question asker would like me to. But it wouldn't take a long time to achieve the synergies that we'd expect to achieve. We don't know exactly how long certain of their contracts go on for that have to be canceled. We'd have to figure out lease synergies. It's really difficult for us to answer that question, but it wouldn't be a very long period of time. It would be our #1 priority to achieve that as quickly as humanly possible.

So that marks the top of the hour for us. So I'm going to turn things back over to you, Stuart, for closing remarks.

Okay. Thanks, operator. And -- so everyone, that concludes our presentation for the day. I really want to thank everyone for joining us. Really appreciate you taking the time and really appreciate all the questions that you put forward. We've answered as many of them as time would allow. If there are any other questions that were submitted through the dashboard, we will review them, and we'll endeavor to address them on our website at cgyourpartnersingrowth.com. And anyone interested in contacting me directly, please, please do so. I'd very much welcome an opportunity to engage with you. So once again, everyone, thank you so much for your time. Enjoy your rest of your day. Thanks.

Thank you.