The proposed merger between the Royal Bank of Canada and the Bank of Montreal has sent shock waves through the Canadian brokerage community. Many employees of the broker/dealer subsidiaries of both firms almost overnight began polishing r‡sum‡s and fielding calls from headhunters.
It isn't so much that producers are against the merger but rather, according to many, they are against what they see as months of uncertainty ahead.
If approved, the merger would bring Canada's two largest broker/dealers under one roof, The Royal Bank's RBC Dominion Securities, which has a total of 5,250 employees including 1,650 brokers in 195 branches, and the Bank of Montreal's Nesbitt Burn's unit, which has 4,300 employees and 1,350 brokers in 132 offices.
Because of the size of the merger and the exalted position the so-called Big Six banks hold in Canadian society, regulators have already said they are going to take a long, hard look at all the ramifications of this deal. Both firms have been told not to expect any decisions for upward of eight months.
"That is a very long time to be unsure about one's future," says an RBC Dominion broker. "So I'm taking the time now to examine my options."
Adding to the feelings of uncertainty are concerns already being expressed in some quarters that the proposed new brokerage would just concentrate too much power in a single firm. "I think it works out to roughly one out of five Canadian brokers would work at this firm, and in Canada, there's an aversion to too much 'Bigness.' You have to believe the regulators will intervene somehow," says a senior Nesbitt Burns sales executive.
If approved, the merger would likely lead to some branch consolidations.
"I think star producers will be OK, they always are," says an RBC broker in central Canada. "But anyone just below that level could be in trouble, as well as branch managers and sales assistants when they start consolidating offices."
Others wonder how RBC's modern retail culture would mix with Nesbitt Burns' reputation as a more sedate manager of old money.
"Many of us had a hard time adjusting to the acquisition of Richardson Greenshields--now we have to deal with this," says another RBC broker.
In 1995, RBC acquired Richardson Greenshields, Canada's oldest private brokerage. The melding of the two cultures was not smooth, brokers say.
One key aspect of the proposed merger will be a move into the U.S. marketplace by the new firm. Since the acquisition of Oppenheimer by the Canadian Imperial Bank of Commerce last year, both firms have been known to be eyeing the acquisition of small U.S. brokerages. Together, the conventional wisdom in Toronto says, a Royal Bank/Bank of Montreal combination would have the size to make some headlines buying a major mid-sized firm down south.
What firms are most mentioned?
"You'd be better off asking which aren't," says a Nesbitt Burns trader. "I've heard everything from Lehman Bros. to A.G. Edwards. The way the rumors are flying, I wouldn't be surprised to hear Merrill's name pop up as well."