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Sunday, 19 November 2017

US Mid-Market Equity House: BMO Capital Markets

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  • Coming to fruition

Mid-market companies require a focused, customised approach towards investment banking. For extending a full suite of services across the corporate life cycle, BMO Capital Markets is IFR’s US Mid-Market Equity House of the Year.

Bank of Montreal’s concerted push into the US came to fruition in 2014. Just two years after the Canadian bank ramped up its investment banking efforts, the US arm of BMO Capital Markets saw momentum across its platform manifest itself in significant market share gains in equity capital markets.

A focus on small and mid-cap oil exploration and production companies, by definition heavy users of capital and a historic strength of the firm, was a particular highlight. Expanding lending relationships culminated in bookrunner mandates on equity raisings for clients such as Rice Energy (US$1.1bn), Eclipse Resources (US$818m) and Memorial Resource Development (US$935m).

“We want to pick the companies that we do business [with] and grow our share of the wallet with those clients as they grow over the next decade,” said Americas ECM head Michael Cippoletti, a former Morgan Stanley energy and healthcare banker recruited in 2012.

“Not only are we able to provide bulge-bracket intellectual capital and sector breadth but we provide a number of balance sheet financings as well,” he said.

The bank also benefits from a global investment banking platform. For example, BMO extended its global non-deal roadshow team to Goodrich Petroleum, allowing the small-cap explorer to conduct a three-day roadshow across Europe to educate 24 investors – 23 new accounts – in June 2014 about the relatively unknown Tuscaloosa Marine Shale formation.

Early stage adviser

BMO’s life sciences practice, one of nine industries covered in ECM, hit another major investment theme of the year.

Life science origination is headed by Steven Tuch, who also signed on in 2012, from Deutsche Bank, to focus on healthcare, technology and private placements. Rounding out the four-member origination team are Michael Anderson (FIG/Industrials), Phil Winiecki (Consumer/RE)*, and Cippoletti (Energy/Business services). Lori Begley, a 21-year BMO veteran, heads the US syndicate desk.

“BMO is an excellent hybrid of Deutsche Bank’s distribution but with the client-focus of a middle market firm,” said Tuch.

In a year that saw life sciences companies raise US$5bn across 60 transactions, the firm excelled for differentiated advice.

When rivals advised caution, BMO turned to its research experts and suggested that pre-clinical animal healthcare provider Kindred Biosciences move forward with its IPO in December 2013. Amid an environment of broader market volatility and pulled deals, the offering resulted in an over-sized US$65m fundraising that helped open the market to other biotech offerings.

Committing its resources to such early-stage biotechs and cultivating those relationships is another way that BMO wins new business.

Tetraphase, a developer of antibodies, is a prime example. The company elected to elevate BMO for advice provided on marketing and positioning on a pair of follow-on stock sales that continued development once exhausting proceeds from its 2013 IPO.

“Including pre-marketing and testing the waters, BMO has done a phenomenal job for us in our IPO and our two subsequent follow-on offerings,” said Tetraphase CFO David Lubner. “They get it and know how to execute for middle-market companies like us.”

Overall, BMO helped bookrun 38 ECM transactions in the IFR Awards period earning US$2.3bn of league table credit, a 155% gain on 2013 book proceeds. One signpost of a focused approach, said Cippoletti, was that the bank did more book-run than co-managed deals – 38 versus 32 over the consideration period.

Ultimately client solutions are not always evident in the public markets.

Further highlighting its bulge-bracket capabilities, BMO earned distinction on the secondary buyout in May of Learning Care Group by American Securities. The bank, which had been mandated alongside Morgan Stanley and Bank of America Merrill Lynch on a potential IPO, played a critical role in identifying the buyer, as well as in helping arrange US$370m of acquisition-related financing.

The momentum of BMO’s US capital markets operations was evident in the promotion in November 2014 of US banking head Perry Hoffmeister to run banking globally. To further align its presence in the US, the bank tapped former Canadian banking Peter Myers to head US banking.

* Corrected to Phil Winiecki.

To see the digital version of the IFR Americas Review of the Year, please click here.

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com .

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