Mergers & acquisitions as a successful growth strategy for independents

13 June 2022 by National Bank Independant Network
Three National bank experts share their thought about money taboo

Marc Rivet has been an entrepreneur for over 30 years. Having started as an independent trader, he founded a proprietary trading firm in 2005, which he led until 2012. Today, he and business partner Gabriel Cefaloni lead Nymbus Capital, an investment management firm specializing in fixed income and alternative investments. He shared with Business Builder what he’s learned along the way – from the benefits of a great business partner to the importance of growth to engaging in M&A transactions as an independent.

How did Nymbus Capital come to be?

It all started back in 2007, when I met Gabriel Cefaloni.

I was a partner in a proprietary trading firm called ARB Group when we hired Gabriel. Although he's much younger than me, we had a connection right away.

We are very different, which made us great partners from the start. I have a lot of experience in the financial market, mostly in trading in the fixed income environment, whereas Gabriel’s background is on the quantitative side – a mix of financial engineering, applied math and computer science.

We believed that the quantitative approach was the way to go for the future, but I didn’t have the knowledge and skill to address it. Gabriel was the perfect partner to go in that direction.

After selling my participation in ARB Group in 2012, we considered the possibility of merging our ideas in a new firm. We had ambitions to introduce a new approach in the fixed income environment, and by 2013, we decided to go for it. Nymbus was born.

Nymbus recently completed two major transactions – a merger with Landry Investment management and perseus capital. How did these transactions come about?

When Gabriel and I started out, we made a lot of connections by knocking on doors and meeting with different people in the industry. The primary goal was to have the name Nymbus circulating and let people know the “DNA” of the firm.

In retrospect, it’s not a coincidence that we ended up being involved in an acquisition. Over the years, we met many different individuals with whom the possibility of a merger/acquisition was brought up in the discussions. When you're a small firm like us, if you don't take the time to listen to different propositions, you may miss the right opportunity at the right time.

In the case of the merger with Landry Investments, our two firms complemented each other: we both had a quantitative approach, and whereas Nymbus was primarily focused on fixed income and alternative investments, Landry was focused on equity and private wealth management. We had discussions about a possible partnership earlier in the process, but Gabriel and I felt that we were not ready.

Six months later, the situation had evolved. That's where timing comes in…when everybody feels like they are ready to move ahead with the project. The partners at Landry Investment were ready to sell, and the Nymbus partners ready to buy. We met, made an offer, and negotiations started.

For Perseus, it was different. Our partnership with M. Turmel, then President of Perseus Capital, dates back to 2015, when he became a shareholder in Nymbus. Perseus has a macroeconomic perspective to asset allocation, and a very strong track record in alternative solutions with Mathieu Poulin-Brière, which complemented our approach.

We are fortunate to have such great partners as Messieurs Turmel and Landry. They remain very involved in the firm, as M. Turmel is our Chairman and M. Landry is Vice Chairman and portfolio manager.

Why were these transactions strategically important for nymbus?

Growth was definitely a priority for us. If you're starting an independent firm, you are likely managing a relatively small amount of capital at the beginning. If you don't wake up in the morning obsessed about growing your AUM, you're in the wrong business! We also had strong beliefs about what direction the firm should take.

At a certain point you sit down and say, “Ok, what’s the best way to achieve our goals?” Through these transactions, we created momentum. It has given us the resources to take our firm to the next level.

Was it difficult to transition clients?

We had a smooth transition, thanks largely to the close collaboration with our partners at Landry and Perseus. It was very important to ensure the involvement of key people who were close to the clients. They did a wonderful job of introducing us and conveying to clients that they believed in us. It was essential for the clients to believe that their money was still in good hands and that they would continue to receive the same level of service as before.

Many of the team members from both companies have joined Nymbus. We are thrilled to have their expertise. And they are great to work with.

What advice would you give to other independent firms who are considering mergers or acquisitions as a growth strategy?

When we were going through the process, we met with fellow CEOs of asset management firms. One of these CEOs was Sylvain Brosseau, founding partner at Walter Global Asset Management. He shared a very useful piece of advice that still resonates with me.

He told me that you must give a lot of importance to the people with whom you are dealing or planning to have a partnership. It's all about the relationship you are going to be able to build with people. It's built on trust and respect. If you feel like it’s not quite the right fit and ignore that instinct, it will come back to haunt you.

When I look at our journey, his advice rings true. We had met with others along the way who didn’t feel like the right fit, and those transactions didn’t work out. With Messieurs Turmel and Landry, we sensed that deals would work well.

Also, make sure you have a devil's advocate on your team during the process. They will challenge your ideas, which can be frustrating, but you’ll ensure that all the angles are covered. They may see an upside or downside that you overlooked.

Among your other responsibilities at nymbus, you are chief compliance officer. How did you come to have that role, and how do you stay on top of requirements?

I lost the coin toss! Seriously though, back when Gabriel and I started out, Gabriel was very busy developing the quant strategy, so I took on compliance. As a first step, I took the Partners, Directors and Senior Officers Course with the Canadian Securities Institute.

I’ll admit that, as an entrepreneur, it’s counterintuitive to have such rigid regulations. When you start almost any business other than investing, you have much more freedom. But at the end of the day, I believe it’s a must because people entrust you with their life savings. You want the public to be protected and we all understand that solid regulations are required.

I can never thank enough the Quebec Emerging Manager Partner (PGEQ which offers possibilities of seeding emerging managers in Quebec). The program pushed us to reach an institutional level of compliance early in our process. At first it was a very frustrating exercise because they ask so much in their due diligence, but in retrospect, it was the right thing to do.

How long have you been an independent?

I’ve been an entrepreneur for more than 30 years. I've always had that mindset.

I was raised in an environment where my father owned jewelry stores and my sister and brother were partners in the business. So you could say entrepreneurship ran in the family. When I first went on my own as a trader, I appreciated the freedom it gave me. But over time, I wasn’t completely fulfilled with my trading activity. Trading is just an accumulation of dollars, and, at some point, I wanted to be driven by something other than looking at a P&L. I felt I needed to build something. Probably each entrepreneur finds their own personal motivation, and we may be different in this sense, but our personality types are very similar.

What advice would you give to someone who is considering going independent?

Know that it’s going to take more time, and more work than you thought.

Choose the right partners, never give up, stay the course especially when times are tough, always be on the lookout for good opportunities, and keep believing in yourself, your partners and your product.

Are you thinking about going independent? Contact NBIN today to learn more about independence.

Legal disclaimer

National Bank Independent Network (NBIN) is a division of National Bank Financial Inc. (NBF Inc.). Please note that comments included in this communication are for information purposes only. The opinions and endorsements expressed herein do not necessarily reflect those of NBIN.