Morgan Stanley buying Solium Capital, shrinking field of billion-dollar Canadian tech companies

The Morgan Stanley headquarters development in New York on Oct. 21, 2009.

TIMOTHY A. CLARY/AFP/Getty Photographs

U.S. monetary products and services large Morgan Stanley is purchasing Calgary-based Solium Capital Inc. for $1.1-billion in the most recent deal that may wrest a large generation participant from Canadian keep an eye on.

The pleasant transaction represents Morgan Stanley’s greatest acquisition for the reason that monetary disaster in 2008, and permits it to meld its company wealth-management trade with Solium’s tool, used for administering worker stock-based repayment plans around the globe.

Morgan Stanley already knew the Solium trade smartly – it has outsourced equity-plan management for its shoppers to the Canadian company since 2016. It sees fairness repayment as a significant enlargement space as extra younger other folks input the paintings drive and profit from such advantages.

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“We all know that stock-plan contributors on reasonable are considerably more youthful than our reasonable consumer base within the wealth-management trade, and so this offers us a possibility to start running with them when their wealth is being created,” Brian McDonald, head of company and virtual answers for Morgan Stanley’s wealth-management department, stated in an interview.

It’s providing $19.15 in money for every Solium percentage, a hefty 43-per-cent top rate over Friday’s remaining value at the Toronto Inventory Trade. Solium’s greatest shareholders are Mawer Funding Control and Solium chairman Michael Broadfoot, every with greater than 10 consistent with cent of the inventory, in keeping with Bloomberg.

Morgan Stanley plans to stay Solium’s 800 staff, together with Marcos Lopez, the corporate’s leader government, who will stay in Calgary to run the trade for the brand new proprietor.

“We’ve had a type of two-year take a look at pressure with them, so that they know our tradition in reality smartly they usually know our platform in reality smartly,” Mr. Lopez instructed The Globe and Mail. “So that they got here into it as an excessively an expert purchaser, they usually had been ready to satisfy the hurdle that we, as a board, felt was once a good value for our shareholders.”

The Canadian company has 3,000 stock-plan shoppers with about a million contributors. It’s been a quiet good fortune tale and a consolidator in a distinct segment trade, beginning as a brokerage with a generation arm within the overdue 1990s ahead of restructuring early up to now decade to be aware of web-based tool for administering worker inventory plans, in large part for Canadian power firms.

It expanded in Canada ahead of opening a New York workplace in 2005 and acquired Michigan-based Allecon Inventory Friends two years later, giving it a big foothold in the US. Solium has made a number of acquisitions since then, increasing its operations into Britain, Australia, France and Germany. Its final acquire was once Complex-HR, a San Francisco-based supplier of repayment knowledge and making plans tool, in 2018.

A few of its shoppers come with Royal Financial institution of Canada, Cineplex Inc., Dropbox Inc., Levi Strauss & Co. and Shopify Inc.

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Rapid enlargement in its numbers of huge title shoppers presentations the arrogance the marketplace has in its platform, stated Jeff Mo, portfolio supervisor at Mawer.

“Even supposing the top rate is wholesome and is a good, risk-adjusted value, Mawer is all the time unhappy to peer a wealth-creating corporate cross, particularly when one with nice long-term upside sees public participation in its enlargement truncated,” Mr. Mo stated in an e mail.

Certainly, the deal additional shrinks the sector of billion-dollar Canadian tech firms, following the gross sales final yr of Vancouver-based Avigilon Corp. and Ottawa’s Mitel Networks Corp. Canadian tech firms transform horny to U.S. consumers as soon as their revenues input the $50-million to $100-million vary, stated Tom Liston, government vice-president at Toronto-based private-equity company Distinction Capital. To stay impartial above that stage they require executives with world enjoy.

The task leaves Canadian buyers with much less selection, particularly when compared with U.S. inventory exchanges.

“It might be a lot more healthy if we had much more Shopifys, firms which are ready to punch via and stay their natural enlargement going,” Mr. Liston stated. “It’s excellent for shareholders in the meanwhile, however the TSX is weighted to grease and fuel, monetary products and services and mining. You’d like to peer extra range. You’d like to peer extra multibillion-dollar firms staying public.”

Mr. Lopez stated, alternatively, that his company’s takeover by means of Morgan Stanley leaves ability and generation in Canada, relatively than hollowing it out.

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“We must be extra involved as a country after we see firms go away – lay their team of workers off and retrench again as it’s a difficult position to do trade,” he stated. “It is a state of affairs with Morgan Stanley discovering generation they love that occurs to be in-built Canada they usually proceed to consider that’s the place it must be constructed.”

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