Investment Banking adapts to COVID-19-induced changes

October 7, 2020 - 60 minutes

In this featured episode of Bid Out Podcast, host Peter Haynes chats with Robbie Pryde, Vice Chair and Head of Corporate and Investment Banking at TD Securities, on the latest developments in investment banking. They also discuss the priorities of CEOs in a post-pandemic environment, the surprisingly strong calendar of IPOs for Canada, and Robbie's leadership journey at TD.

Full Transcript


PETER HAYNES: Welcome to episode 25 from TD Securities' Podcast Series, "Get Out-- a Market Structure Perspective from North of 49th." I'm your host, Peter Haynes. And today is personally a very special interview for me. My guest for episode 25 is Robbie Pryde, Head of Corporate and Investment Banking for TD Securities, a post that Robbie has held for the past four years. Prior to running Investment Banking, Robbie was responsible for the Equities Division at TD Securities for close to 15 years.

Welcome, Robbie. Just got to get it started here by asking you to be honest with me. The statute of limitations is over now. I haven't reported to you in four years. Was I the biggest pain you ever had?


Well, hi, Pete. And first of all, thanks for having me on your podcast. Number 25-- I can't believe it took 24 of these before you finally figured out you probably should get me on here. So for that…

PETER HAYNES: You know where you rank.



ROBBIE PRYDE: But as far as being the biggest pain, I'd say no, you weren't. But I give you really high marks for how hard you tried to be the biggest pain. So definitely, A for effort.

But I've always appreciated your dedication to all things market and market structure-related. And I've always viewed you as my professor of the market. So I'm happy to be here today.

PETER HAYNES: Well, you gave me a great opportunity to build that expertise up over the past 25 years at TD, and 20 since you joined the firm. Before we dig in on the investment banking space, which is what we're going to talk about today, I want a quick reminder to our audience. This podcast is for informational purposes. The views described in today's podcast are of the individuals and may or may not represent the views of TD or its subsidiaries. And of course, the content of this podcast should not be relied upon as investment, tax, or other advice.

So let's start in an obvious spot, Robbie. Four years ago, you were asked by our CEO, Bob Norris, to take over Investment Banking at TD Securities after a long and successful career running the equities business. What has been the biggest surprise about the move from capital markets to investment banking?

ROBBIE PRYDE: Well, I wouldn't say there was a big surprise in terms of the Investment Bank itself, because I'd worked closely with it or in parts of it and had parts of it under me for years. I would say it was likely more just around-- growing up in the equities world, essentially my entire career, all the technological advances-- and electronic trading is probably the best example-- just all the techno advances just caused sort of, if not day-to-day, certainly month-over-month change in the business. So technology really drove a lot of the equities world.

So I would say that I was a bit surprised when I came into the investment bank that the technology wasn't a bit more front and center. And so I would say that I've taken my past, and I've been focusing on technology as a tool on many fronts, to help us deliver better results for our clients and for ourselves internally. And then an overused word-- innovation-- is something I do grab onto, and really trying to innovate internally for our bankers themselves, but really important, externally for our clients to think innovatively.

And then I'd just say lastly, from a surprise standpoint, four years ago when Bob and I were discussing the potential growth for the investment bank, he realized the US was a real opportunity for TD Securities to capitalize on a growth goal. So that didn't surprise me, because we'd been immersed in a US dollar strategy. But I think what surprised me was just how much runway lay in front of us, and then how much we could actually accomplish in the coming years. So subsequent of that, in the last four years, I think we've accomplished a lot. So I'm surprised positively, I would say.

PETER HAYNES: Well, you mentioned innovation as a key theme that you're focused on in Investment Banking. And I'm interested, actually, for you to talk a little bit about when you think of innovation in the context of the employees evolving in investment banking, I'd like to understand a little bit about it. Let's just pose a scenario here, Robbie.

You have a candidate who may come in to run a sector for you, a managing director, senior executive in investment banking. Today, what would you be looking for in that employee? What would be the three things that would be key to you that you'd want to see in that prospective employee? And is this the same answer that you would have given 10 years ago?

ROBBIE PRYDE: That's interesting. I would say that from 10 years ago, a couple things wouldn't have changed. Let's start there.

So I think we always try and search out curious thinkers. I think that's always the best mindset, someone who's not satisfied very easily and generally curious. And then relationship builders, they're not part of-- part of the investment world, the investment bank itself, still relies on client relationships and relationship builders. So those are two key attributes, I think, to succeed in this business.

But I would say that expectations for the industry and styles of leadership have definitely evolved in the last 10 years. And you have to keep in mind that each generation that enters this business is another step forward in that evolution of the business, because each generation is a little bit different, come out of school, a little bit smarter, a little better educated, with a little higher expectations. So I'd say that the next generation of leaders and what we look for today, versus what we were probably looking for 10 years ago, is just somebody who knows how to prepare the organization for even more rapid change, OK, and somebody who's got agility around that.

And I would say, not for our just day-to-day transactions but longer-term strategic thinking, I think that's key to anyone's success in this business. So it's imperative not only just to be a strategic thinker for your industry and your client coverage, but also for the overall firm as a whole for TD Securities. And then you need to evolve along those lines to compete for the largest part of our clients' wallet share. That's what we come in every day to do, so.

And then, I would say the pandemic is a great example of change adaptation. Look back over the last few months, and it truly upended our culture of interpersonal interactions. And it's a big, immediate shock to our system when we all were sent home to work.

But we're really working well virtually. We appear to be quite efficient. I wouldn't have imagined that. I don't think any of us would have imagined that 10 months ago, let alone 10 years ago. So I think that's a really been a change as well, so.

And then lastly, we have some qualities that are thriving today that wouldn't have been apparent 10 years ago, which is really the skill set just around clients in crisis. Because what we saw back in March and April, I would say was, from a liquidity standpoint, not fully unprecedented, because the global financial crisis certainly caused a lot of panic. That played out over a very-- a longer period of time, where this was a really short-term blast, then being able to take your team, send them home, run it remotely, and not skip a beat. And then I also think that through the pandemic, key attributes, personal attributes like empathy and the agility, the ability to think quickly on your feet have become even more important than they were even just a few months ago.

PETER HAYNES: Well, you mentioned along-- a theme that is something that I've heard a lot about, certainly in my role at TD now, which is involved in relationship management, is that whole idea of holistic thinking. And certainly from what I'm hearing in your discussion there, these investment bankers that we were theoretically talking about hiring there in the theoretical example, was all about the thinking needed to be firm-wide as opposed to individual businesses. And that's something that has been a key change and a key theme that I've noticed in the past several years.

Now, on the COVID discussion, work from home has really had a disproportionate impact on new recruits. And this is something that I worry about. As much as you talk about how well we pivoted, we being the industry, pivoted to work from home, the reality is, if you're a new recruit, it's pretty hard to get any mentoring with no in-office work experience. How has COVID changed your world, Robbie, and more specifically, what changes have you made to your group's recruiting strategies to adapt to the post-COVID reality?

ROBBIE PRYDE: Well, no doubt, it was a shock to everyone's system, for sure. So we got home. We got our teams mobilized. The technology worked really well a week post getting home. So when you started to breathe and got over that initial panic of the first week or so, immediately you look inward and say, OK, so first of all, so what do I need to do? And then you can't help it. You're a human so, what am I missing? This is a bit surreal.
So for myself, I'm a people person. I love walking the floors. It allowed me to connect easily with dozens of people daily. And that's gone. You can still connect with people, but it's not the same walking a floor and just stopping and even just talking to groups of people. So the lack of day-to-day human contact with co-workers and clients probably has been the biggest adjustment for the vast majority of us.

So that leads you to think about recruits and kids coming out of school or between their third and fourth year and eyes wide open. Of course, none of us have seen a pandemic before, but what does it mean? And after realizing early that we could work very effectively from home, the whole of TD securities decided to continue with our summer student program. A few competitors had nixed theirs. Some shortened it. Some made pretty drastic changes to theirs.

We saw it as a really important decision for the dealer, because the summer recruitment is so critical for feeding our talent pipeline, and at the end of the day, our future relies on it. Very quickly, we came up with lots of ideas and an onboarding program for the summer work project. And we put it together within weeks, which speaks to our team's response capabilities and our ability to adapt.
In recent years-- summer programs are designed so that the recruits are paired with someone from their team that's-- we want to support them on a day-to-day basis as partners, answer their questions, be there for them-- is a really steep learning curve. So that became even more important in a virtual environment, so we made sure that we paid lots of attention.

I would say, lastly, our leadership team was very active in their outreach. So a number of senior executive panels were put in place to provide our recruits exposure to senior thought leadership. And it was important to us to give the students as rich a summer experience as we could. So we gave them all the tools from a electronic technology point of view, got it to them immediately, onboarded them in a fashion that they actually understood what they would be doing this summer, gave them a project that was meaningful around ESG that meant a lot to them and to the firm.

And then I spoke directly to every one of our summer recruits, and from my conversations, it was universal, the praise for the onboarding and the exposure they got over the summer. So as weird a year as it is, we pulled it off. And I think we did it better than our competitors, but I think everyone out there was trying to pull together the best they could.

So I'm really proud of our efforts, proud of everyone that touched it at the dealer end who did a really good job. And it bodes well for recruits, and it bodes well for our future from a pipeline perspective.

PETER HAYNES: Well, you talked about the difficulty of being a young recruit in the business today when we're in a work-from-home environment. And I think, Robbie, as we're about to talk about graduates coming into the workforce, I think of your own situation where you have a son that's going to be graduating and coming into the workforce. And my kids are there in a few years as well, god willing. But I'm just thinking a little bit about when you think about the type of advice that you would give graduates who might be interested in a life in investment banking in the next decade and beyond, what advice do you have for those young men and women that are considering a career in investment banking?

ROBBIE PRYDE: OK, well, I think my son is more likely to be a regulator than he is an investment banker. So we'll start there. [LAUGHS] I would say every industry is evolving, and our industry is evolving. So if we're being honest with ourselves, the financial crisis of '08, '09 didn't do the reputation of our industry any favors. We went from being the most sought after and illustrious postgraduate job to a little darker place because of the regulators' view and the public's view in terms of what led up to the financial crisis, some of it earned, and maybe some of it not earned.

That momentum was lost in terms of being the place to go. Today the reputation of our industry has improved immensely. I think technology and innovation is driving change in our business, for sure.

There's more tools available for our new recruits and for existing bankers. They just-- they make your job easier, in terms of being a banker, but to make you better for your clients. So that's changing things, for sure. And certainly looking to the future from that perspective.

And then I would say the pandemic has opened our eyes even more to a flexible workplace and what does it take to really run a business going forward, and for the generations on to come. Of course, we're learning a ton and realizing that more flexibility is a good thing and there is a different way of looking at the business and doing the business. And I think that opens things up for a larger group of potential people entering the industry, and I'd say it bodes well for the future.

And the other thing I'd say to you is, we have a reputation for being a fairly hard-driving industry and a lot of long hours. And some of that's true. When you're in deal mode, you're putting in long hours. But we really, in the last number of years, have been focused on health, the well-being of everyone. And I would say that for anyone coming into the industry, they should feel comfortable that we take you and your health the number one. That's how we're going to get the best results from you, and you get the best results from your career if we actually care about you the person first. I think that's key.

And then for the business itself, for investment banking specifically, which you have me on here for, I would say that client relationships are always going to matter. How we do it and how we deliver our bank and our expertise to our clients will continue to evolve, and I think in a very positive way. So at the end of the day, I still very highly recommend this business. And I think it's going to get better and better going forward if we continue to think through what the investment bank of the future needs and will look like.

PETER HAYNES: Well, one of the ways that the business is going to become a better business and a more inclusive business is really, Robbie, one of the strengths that you've brought to Main Street, and that is your role in TD, in particular, TD's efforts around diversity and inclusion. And more recently, you were given a very prestigious award by Women in Capital Markets, the 2020 Champions of Change Award. So those are much deserving, and, Robbie, you're playing an important part of that evolution that we're going to need in order for our industry to be able to continue to attract and retain a diverse audience of candidates for our business, and let's hope that continues.

So why don't we pivot over here to the day-to-day business a little bit? We've talked a little bit about the qualitative factors of the business. Now let's get into the meat of the investment banking world. When you've been talking to company executives in North America this summer, Robbie, what was the number one question on their minds?

ROBBIE PRYDE: Earlier stages, it was all about liquidity, balance sheet management, and helping out from that regard. So that's where the questions were coming in from and where the biggest concern was and what was on their minds. For other parts of our client base, like private equity, et cetera, they were looking for opportunities and-- but also looking at their own portfolio of companies and deciding who the winners and the losers are going to be, et cetera. So around that, I would say that to form your mind around strategic direction, it was really around questions around the economy and what does this mean for our economies. And is there going to be permanent scarring, and if so, how and where?

And I think that really helps drive their corporate direction, their strategy and decisions. So I think that was probably the number one question through the entire piece, what the economy could look like coming out the other side. And then the other significant observation that I've been making is-- and I've alluded to it a couple of times-- is just how quickly technology is changing things. Most of us have grown up in a world where technology has changed our lives, our day to day, work, et cetera. But the last few years, but especially the last few months, it's been exponential.

I would say that some CEOs have been in tune, and others have not been in tune with just how rapidly technology is changing, and certainly get it now and what it's doing to their business, and what it's doing to the competition around them and how they compete going forward. So I think that just leads to strategically-fueled questions about how to adapt, how do you keep up, what are the implications, both short and long term? And then at the end of the day, I think the conclusion is, running the business is never easy, maybe harder today than at any other point in time.

So you either embrace technology and it becomes your friend, or if you ignore it, it becomes your enemy pretty quickly. I think that's a realization that many CEOs have come to. As I mentioned, the overarching concern in the early days was around liquidity and balance sheet management, and that's not going to go away. Once bitten, twice shy. I think liquidity management, balance sheet management, on a go-forward basis, is on all of their minds in a pretty big way.

PETER HAYNES: Well, when you talk about balance sheet management-- and when people think of TD Securities, and they think of the counterparties that TD Securities is dealing with as part of a Canadian bank, they think of mostly a Canadian footprint. It's probably not that well known, Robbie, in the industry just how big TD's investment banking footprint that you're responsible for is south of the border. Can you walk us through some of the metrics in terms of the breakdown between the various regions and sectors and coverage, and maybe a little bit about the plans you might have for growing the investment bank here and around the world?

ROBBIE PRYDE: Every year, we're growing. For sure. In Canada, we're in all the obvious places. People know that. We're in Vancouver, Calgary, Toronto, Montreal.

In the US, New York and Houston, and then of course in the UK, coverage from all regions into Asia. Somewhere between 375, 400 in Canada, 275 to 300 in the US, and 24 in UK. Where that number's really grown in the last number years is in the US. I would say that that's likely where, from a headcount perspective, where most of the growth will come. We run an integrated investment bank. Think everyone knows that.

We have sector expertise across a number of key industries, and those industries would include energy and mining, obvious Canadian strongholds, communications, media and telecom, CMP business. In that, you throw in a second T, which is Technology, which we've really been driving the last two years. Diversified industries, real estate, financial institutions and financial sponsors, those are sort of like our sweet spots and where we're investing in relatively heavily over the last number of years.

So the significance of this means a few things for the dealer, firstly that we're building a US dollar business in sectors where we are or can be competitive. We're not chasing cars that we don't want to catch. We're lending within targeted verticals and then looking to up-tier within those verticals as we mature in terms of our coverage model.

We have tons of room to grow organically within various sectors, including financial institutions, non-bank financials, power and utilities, where just more recently, adding a headcount in the United States, financial sponsors, where we've been adding headcount. Technology, same. Health care, same. Chemicals, consumer products, and industrials, all areas where we see tremendous growth opportunities for us.

And it's not all just in the US. Many of the companies we deal with are global institutions that span the globe. But we're interested in originating in North American markets, so I think that is a key thing for us.
And I'll just use an example of how we build. Earlier in the year, we welcomed the advisory team, people from Kimberlite, which expanded our US real estate franchise. I think that was nine individuals that we brought in that really gives us a really strong foothold into an industry that we like to lend to and we're good at. So all in all, I'd say I'm excited about the opportunities, Pete, that lay ahead for us. But just a ton of work to do [LAUGHS], a bit daunting.

PETER HAYNES: Well, I bet it is daunting. And one of the places you talked about that TD has a presence is Houston, and that clearly is because there is a significant amount of exposure to the energy patch that's based in Houston. And TD has a big footprint in the Canadian energy patch as well, and it's an important sector in our market. And even just recently, TD announced the hiring of The Honorable Rona Ambrose as a deputy chair based out of Calgary. I'm sure Rona's going to spend a lot of time working with issuers in the energy sector around the changing dynamics and particularly around renewables.

So why don't we talk a little bit about, more specifically-- when you're talking to Calgary, when you're talking to Houston right now, and you're talking to through the COVID window, what is the message that you're hearing from CEOs in Calgary and Houston? Is it, we're going to batten down the hatches here and manage these tough times? Or are you anticipating that there would be more of an M&A activity that will heat up amongst North American energy companies over the next six to 12 months?

ROBBIE PRYDE: She has been working with us for the last couple of years from an advisory standpoint and getting closer to us, so it was a natural for Rona to come up and join us. So we're really excited to have her with us for a number of reasons, a whole host of reasons, and not just energy related. And I think that she's going to bring a lot of experience and capabilities, both corporately, but also as well from a women in leadership in the capital markets standpoint that you alluded to earlier. So we're really excited to have Rona on board from an energy perspective, absolutely, and then we have Frank McKenna as well.

So energy in particular, I would say that it's been quite a wild ride in the energy sector these last few months. We all know that. The initial combination of the OPEC plus the supply shock and then COVID demand destruction made commodity markets completely and exceptionally volatile in March and April. But I would say that we're pretty pleased in terms of how quickly prices stabilized. And in some markets like natural gas, they actually have an awfully strong market.

So I think it showed that markets work. There was the odd day where it didn't look like they were working very well, but all in all, I would say we feel pretty good about how they work. There were some victims, for sure, of the commodity price shock. I am proud to say that we had more liquidity facilities than any other Canadian bank, so we were busy.

Now, with markets relatively stable, you're asking about whether they're battening the hatches or opening. I would say that the hatches are opening a little bit, Pete, and companies are thinking more strategically. I think our sense is that consolidation is increasingly in their dialogue, but it would be overshadowed, I think for the most part, by maintaining balance sheet strength. So certainly, we don't have a deal for the sake of doing a deal talk going on. So we expect to see fewer cash deals that will stretch balance sheets but more strategic deals that make sense for shareholders and for the future of the industry.

And then we can't talk about energy without talking about ESG considerations. And they're also taking increasing prominence in our M&A dialogue. For instance, the impact on greenhouse gas intensity is now part of the M&A dialogue, where it wasn't not that long ago. And we're seeing that these considerations are now C-suite and board level discussions, and they're not going away and are going to stay at that level through the piece.

Our larger clients are using the market disruption to focus more on their corporate transition to a lower carbon economy. We're all reading the same headlines. It's actually ironic that these considerations have gotten increased prominence in a time where there's been so much market stress.

So I'd say that there's probably no doubt that the pandemic has heightened the discussion around peak demand and energy transition. And it's a key reason why we want to consolidate our efforts around ESG. We're looking, I'd say, to ensure we are offering a seamless and strategic approach to corporate transition.

It's maybe a key area of growth going forward. We've seen lots of stress on private equity, sponsoring oil and gas companies on both sides of the border. I would say the dominant focus in that part of the sector right now is on survival versus expansion. And then lastly, you can't go without, on the energy side, talking about infrastructure, and I would say, particularly your government-owned assets. And they will likely be front and center once we get past the current election cycles and governments looking to ease their debt burdens.

PETER HAYNES: We definitely have to assume that there's going to be government-sponsored infrastructure spend. It's definitely an asset that are going to come for sale there. And that brings in the private equity equation.

You mentioned briefly the private equity space with respect to the energy sector. Where do you see private equity in and their $2 trillion of dry powder that they're sitting on right now in terms of potential involvement in energy? Are valuations at a point where private equity may step in? Is private equity concerned about ESG issues relating to specifically energy or climate footprint? I'm just curious if you have any thoughts around the private equity involvement in the energy space.

ROBBIE PRYDE: I think it's important that we just talk about private equity generally, Pete, because it's such a large part of what's happening within our industry, what's driving a lot of businesses right around the globe. So on the energy front, as mentioned, it's more around-- I said battening the hatches there versus new money coming in. I think that's likely going to continue until we get full stabilization of commodity prices.
Probably higher prices. You're not going to see a ton of activity. There's some things going on, but I wouldn't say it's at the forefront of PE activity right now.

It's interesting. You look at post the financial crisis, because you asked about bargains-- so post-'08, '09, PE activity declined pretty significantly, and that was, I would say, largely in part to the tightening of the credit markets. And we saw similar declines in PE activity in the very early days of the COVID crisis, but it seemed to be more related to the uncertainty of our economic outlook. Liquidity part, the credit markets part only lasted, I think, days or weeks. And I think it'd be more around the economic outlook and who the winners and the losers are going to be going forward.

And I'd say, early days of the crisis, the private equity people I was talking to pretty regularly back then had two areas of focus, their own portfolio and who was bleeding, who was going to thrive, and with another eye on, what are the opportunities out there, and what can we do? Well the opportunities didn't really come about-- there wasn't really a lot of transactions over that few-month period in private equity, because valuations didn't stay down very long. Markets opened up and certainly, the action of the Fed, government action globally feeding the system of liquidity, had a lot to do with that.

But private equity firms, pension plans, et cetera, they're really eager to deploy capital. They're active. But with a lot of bargains, we're not seeing a flurry of deals.

Over the longer term, I would say private equity will play an increasing role in both Canada and globally around M&A. I think, no question, it's a big focus. I would say there is a lot of dry powder-- 2, 2,5 trillion of dry powder that's looking for deals. It's going to continue to influence in terms of returns if other asset classes are lagging.

Companies that are private want to stay private longer. What does it mean for public capital markets going forward? I think those are all questions that continue to be out there.

There's sectors like consumer health care, financial services, industrials and I would even say business services, where there's deals happening and deals being looked at. That's mostly in the US. For Canada, when a large asset comes available, the global investors are definitely here looking for them.

An example I can give you from a few months ago was BC Partners in GFL. I think company management teams increasingly view private equity as a source of strategic capital. If I can give you an example, like when Thomson Reuters made the decision to sell a 55% stake in Refinitiv to Blackstone, what were they doing? I think it was a way to reduce exposure to a slow growth segment.

I think they wanted to maintain a stake in the synergies that Blackstone could generate in terms of raising capital and Investing in higher growth segments. So it was viewed as a win-win, and I think it's turned out to be a win-win. And I think that's an example of the type of deals and the type of creative capital we could see going forward.

And I think strategics should always be able to win over private equity due to buying down the multiple synergies. But many PE firms have platforms and investments and the dry powder we've been talking about, allowing them to compete through their existing portfolio companies. So although they're the strategics, they're actually industry players as well, so that's changing the state of play as well.

At the end of the day, they're not afraid of doing deals with private equity. Generally, they're all aligned in terms of what their goals are. Whether they're looking to invest in capital to grow a business, even if there's a J-curve in the short term, it always seems to be front and center of what the end result's going to be. That can result in a good payoff for shareholders, but also for management as well, making a line on that. And I think we're not afraid of that.

And I would say, if you're a high-performing CEO and you're confident in your abilities, you tend to not have an issue with an active PE owner, because you're all focused on the same end goal at the end of the day anyways. And that's driving 20% returns and getting rewarded in a relatively short period of time, probably more so than you would have thought 20 or 30 years ago. So they need to have a plan and make the calls on where growth will come from and go after it relatively quickly. And that is just a sector by sector situation, and it also is very much driven by what's going with our economies.

PETER HAYNES: Well, you mentioned the economy. And obviously the economy's going to drive a lot of the decisions around M&A. But just at a high level, Robbie, as you think about the next wave of M&A in Canada, you mentioned strategics should always win over private equity, given the way that they can integrate companies and synergies. And we did see a strategic bid made recently, at least a proposed bid, between a US company, Altice, and Rogers trying to bid for Cogeco's assets. That was announced a couple of weeks back. Are you anticipating there to be a lot more of that type of strategic M&A over the next six to 12 months, or is that entirely driven on how the economy-- whether we get a V-shaped recovery or a U or a different form of recovery, or maybe we have an extended period in COVID?

ROBBIE PRYDE: I think it's very company and industry-driven, Pete. In the example you gave, Altice, Rogers, and Cogeco, Rogers has owned a piece of Cogeco for a long time. Did COVID drive it? If you listen to what management's been saying from the Rogers side, it's been driven off of what's happening in the industry, which is specifically 5G.

You'll have some COVID-driven M&A activity for sure, because not everyone is going to survive. I think divisions will get sold off, if not the entire companies. Companies looking to shore themselves up will sell either winning or losing divisions off. From that comes opportunity.

So to really answer your question, I think that COVID is just-- it's another factor, and it's a big one. Clearly, the shock of the economic shutdowns and the impact of COVID means more for longer rates. That affects a lot of industries, including the banking industry. So everyone's resetting for that.

And then the flood of liquidity that's hit the system is shoring up economies and insuring that we didn't dive deep into recessions or depressions, given the fact that a large part of the world economies were shut down for periods of weeks or months. So that's all to play out and will continue to play out. So I think you'll see COVID-driven transactions, but I think you'll also see normal state of play transactions that likely would have happened regardless. It's going to be a bit of both, I think.

PETER HAYNES: We had another interesting development this summer-- actually, I'll call it concerning-- when the CEO of Barrick mused about moving his company to the US to gain access to, quote, unquote, "at index funds," index fund flows that would come upon inclusion in the S&P 500. So that story briefly tilted Canadian capital markets enthusiasts. I'm putting myself in that category, and I'm very happy that the company decided to put the notion to bed very shortly thereafter.

But when I was doing some research on the whole idea of, what would it mean if Barrick moved to the US and what are the implications in terms of indexes, et cetera-- and I actually-- I do this math, I guess, in the back of my mind, but I hadn't really thought about it. There are only two stocks in all of the S&P 1,500-- so that's large, mid, and small-- that are gold stocks. That would be currently Newmont and Royal Gold. And in Canada, there's 37 gold companies in the S&P/TSX composite index, and if gold stays around $2,000, there's probably another 20 that would be part of our index.

So I've heard a lot of lamenting about our lack of industry champions, but mining is a space where we absolutely dominate. I'm curious, Robbie, as you sit at the top of an investment bank where we have a very strong franchise in mining, what lessons do you think we can learn in Canada from our dominant position in mining that we could take and maybe make Canada's capital markets a leader in a different emerging sector? Let's think of the way health care's changing, or even technology. So when you think about how strong we are in mining, what can we do, what can we learn from that to make us strong elsewhere?

ROBBIE PRYDE: To understand mining, you need to understand the history. History can be a roadmap for success elsewhere in other industries. So if you look at mining, basically the outset of Canada's history and a large part of our economic development was based off the exploration and extraction of domestic natural resources. And that's what Canada was built on, certainly for decades.

And given that history, Canada's retail investor for a long time has been comfortable with investing in exploration companies, whether it's mining or oil and gas. The inherent risk, known, but the, call it the mass opportunities that can result in the profitability if you get winners is tremendous. So it attracted a very large retail investing base. And then that dovetailed over time, that investing culture, into development of larger institutional investors.

What's required-- and in terms of history lesson kind of makes sense. If you think about what's required to extract natural resources, it's geology, geophysicists, the engineers. You need to dig the ground or drill it, metallurgical engineering, lawyers, investment bankers, everything it takes. And Canada's rich in natural resources, so we built an infrastructure around it, and that infrastructure was a strong one.

We're in relative close proximity to large cities, whether it's Toronto or Calgary or Vancouver. We became centers of excellence. These cities grew out of simple economic need of what was going on around them at the time. So in the local communities, you had geologists and engineers and lawyers and bankers, all working from various firms, all attached to the mining industry.

These people need to be educated, so the universities, colleges were geared towards the development of the country and its, call it domestic resource base. So that all associated itself with these centers of excellence. And then it's easy for Canada and our mining executives to export on a worldwide basis, due to our specific and unique expertise in mining and in oil and gas in Canada.

So if you consider the lessons learned over the years, then you can draw a parallel, as you're suggesting, Pete, whether it be health care or technology, and the same things can be expected. These scenes would suggest that these sectors can support economic growth and will, tangible versus intangible assets, the development of cities and schools, communities around what's potentially a diverse set of new industries for Canada. And I think it's really exciting.

So you just have to balance the risk, and getting comfortable with it, and the reward, which can be quite large. And I think in certain sectors, we're starting to figure that out and have been for some time now. If you look at specific centers like Waterloo, where you've got a very vibrant community around technology, well, it's driven mostly off the University of Waterloo. A few success stories in the early days in this latest technology bulge, which would include BlackBerry, either organically or through economic need, these things can all sort of grow or be designed to grow.

And if you look at university programs today, well, computer science is at the top of your combo degrees that includes something around computer science, programming, et cetera. So whether it's technology, health care, or many other industries that clearly have the same types of themes developing, I think cities right across our country, across the US, they can all thrive with new industry development. Tangible assets were the norm. Now intangible assets are truly coveted.

And really, what you need for the intangibles is talent and expertise, and that can happen anywhere, for the most part. So Canada just wants to be as inviting as possible to attract that. So personally, I think it's really exciting. From a, call it banking and investing culture, Canada is really well suited for emerging industries to support. We weren't involved in the cannabis sector, so that is much-- and there were some ups and some downs, just showed how active a sector can get, the investors and certain banking groups within this country.

PETER HAYNES: I absolutely agree wholeheartedly with everything you say, that there's lessons to be learned here. And one thing that you did mention, or you implied it, was Canada has some advantages in North America right now with our immigration policies. And Frank McKenna often speaks about this, about the need for our country to continue to have open immigration, because we're being able to attract and retain some incredible talent that's coming into our great country from outside the North American area and bringing that expertise to help build those industries.

Not something that happens overnight. We live in a business, Robbie, where it seems like we always want to solve everything yesterday. So it's a ground-up battle, and let's hope that Canada can find some of these intangible sectors to be dominant in, like you say.

So just when you talked about COVID, you mentioned the first part of COVID with liquidity. And then it pivoted to raising capital in public markets once everybody had their liquidity situations or the bank lines all in order. And governments around the world certainly have helped stabilize asset pricing.

After that, in the US, we saw a lot of fixed income raises by corporations, and that's pretty well documented. And in terms of equity, it appeared as though there was a split between traditional, straight, common, secondary equity raises and convertibles. So we had an earlier podcast talking to some PMs in Canada, and one of them was lamenting the fact that Canada's companies don't typically raise less diluted forms of equity capital such as converts, whereas in the US, you're seeing these converts coming to the market regularly, and they're not all just hedged converts where hedgers are taking out the-- shorting the stock on the other side.
So with Canada seeing its first large cap issuer in the convert space this summer or earlier, prior to the summer, Air Canada, and then more recently we saw Shopify raise a significant amount of capital in convert structure, are you anticipating, Robbie, that maybe these PMs lamenting the lack of convert equity in the Canadian market might see some more converts down the road with C-follow issuers?

ROBBIE PRYDE: Well, we can only hope. It's certainly been-- not gratifying, but encouraging to see Shopify raise as much as it did. I think it was $800 million on the convert side. Air Canada, which we led, was, the convert part, 750. Colliers was 230, so not small deals.
We've been actively pitching converts to Canadian issuers for a while, and then certainly recently, given the strength of the US convertible market, much harder. So I think in the US, convertibles are viewed as a way to issue common shares at a premium and then achieving a lower coupon that they would compare against the state debt. In Canada, historically, for whatever reason, converts are often viewed as a sign of weakness relative to issuing a straight common.

So I think what we're finding is that converts can be an attractive financing alternative, especially if you've got high volatility and pretty good trading liquidity. That allows issuers to monetize that volatility. And I think in the last few months, eyes have been open around that a little bit.

And then converts also allow you to combine with equity and just make for a bigger offering. So I think Shopify would be an example of that. But certainly Air Canada was an example of getting much more in the door by a combination offering of converts and common.

PETER HAYNES: And so is--

ROBBIE PRYDE: I expect to see more, Pete. So I think we will see more convert issues.

PETER HAYNES: Yeah. Yeah, and I think that's going to be music to the ears of some of these PMs who-- you mentioned the weakness, and it always had to be-- those convert deals in Canada always had to be bought by hedgers who were going to short the stock on the other side to some degree, and that was-- as opposed to the traditional Canadian portfolio manager, who might just place a convert inside an equity portfolio or maybe some sort of a strategy where it's fixed income but they count it as-- there's an outside your mandate investment.

So it's good to hear that there's a little bit more traction in that space. I'm sure that'll be music to the ears of some of the investors out there that just think there's not enough diversification on the balance sheet.

And just in terms of balance sheets and companies, last week payment technology firm Nuvei Corp completed its IPO at $26 US per share. It's a Canadian company, and it promptly bounced 35% in the aftermarket trade. So it's unusual to see Canadian companies that go public to such a significant bounce when a company is first starting to trade. Maybe this is made in Canada thirst for the tech IPO craze that we've seen south of the border. And I guess, recently saw Snowflake double on day one.

So at any rate, Nuvei was only the third IPO in Canada this year and second since COVID began. I guess there's been a REIT that's filed here recently. That would make it four.
Now in the US just this summer, there were 33 IPOs. Do you have any sense, Robbie, or any line of sight on the IPO calendar in Canada? Are we going to see more Nuveis of the world come to market here, and what other catalysts do you think we need in Canada to help jump-start our IPO market?

ROBBIE PRYDE: Yeah. Nuvei was certainly extremely well received. I think it was 20 times oversubscribed, upsized, priced above the range, all great things. I think that demand for new issues definitely continues to be strong, which is a given. I think investors are looking to stay relatively fully invested in markets. And then some of the technology offerings certainly-- they're not flavor of the day, but they're absolutely in demand and partly because that sector is viewed as more defensive now than it ever was, because through COVID, a lot of the drivers of the market were technology companies that didn't seem to waver too much through COVID because of what they do and how they do it.

So I think that certainly opens up the eyes of investors as to where they want to park money. The Canadian market has lagged the US, both in terms of IPOs and the follow-on equity new issue activity. We're starting to see it pick up. Canadian IPOs are definitely starting to emerge. We expect the Canadian market to become more active later this year and certainly into 2021.

This past couple months through the summer, we were involved in lots of IPO beauty contests. We were successful in a number of them, so thankfully that is the case. And we expect many of these IPOs to launch in either Q4 of 2020 or the first half of next year.

So I would say that the COVID crisis has accelerated the IPO timeline for the tech and the tech-enabled types of companies. Prior to COVID, many Canadian-- the private tech companies would target an IPO one to two years out. So that's been accelerated by up to one to one and a half years, part of it off demand, but also part of it off of how quickly their companies have grown, depending on what they do, including iHealth companies through the crisis. So it is company-specific as well.

So whether it's pandemic and the work from home environment that's accelerated it or their own good work, these companies seem to be available to IPOs sooner than we thought leading into the COVID crisis. So attractive public market valuations, that's a good thing versus staying private. Multiples are good and achieving better results than you'd expect. The aftermarket trading in Snowflake was unbelievable, just how far and fast it went.

So I think there's going to be quite a few IPOs, if the markets do hold together, later this year and early next. This is different than the global financial crisis as well, Pete. The North American IPO market closed for close to a year. But these are different conditions. The market conditions are quite a bit different instructors for new issues for the most part.

PETER HAYNES: Robbie, are some of these new issues going to be big enough for a Canadian equity manager? Because let's say they need to see a company at $250 million in public capital once a deal's done. Are the IPOs that you're talking about going to be plus sized that, or are they mostly sort of the $100 million range?
What are you thinking, Robbie? Are there going to be more Nuveis? Because Nuvei was, what, $750 million or so. It was a significant deal.

ROBBIE PRYDE: Yeah, well there's not a truckload of Nuveis out there waiting to come, but there's some larger ones, for sure, and some smaller ones. So I would call it a pretty good mixture. And there's some really good companies lining up. We're excited about a number of them.

Yeah, It'll be interesting to see. I think the investor demand will stick around for them. I don't know if there's any monster ones out there, but there's certainly a few privates in the US of good size that could come. Canada, from a dealer perspective, may not have big roles to play, but for the Canadian ecosystem, yeah. There's a lot to come, and hopefully, at various sizes.

PETER HAYNES: Well, you mentioned something about valuations making the IPO attractive right now, and it kind of makes me think, we were so worried in public markets about private equity and companies staying private for longer. We might have the retail Robin Hood investor to thank for saving the IPO market, Robbie, because they're bubbling up valuations to the point where it's making the most attractive option to go public. And maybe that'll help save the number of companies or grow that number of companies that has shrunk down to, what, 3,500 issues in the US.

One other trend in the US, just before we wrap up, Robbie-- I wanted to talk about it and the implications in Canada-- is SPACs, or blank check companies. It just seems like there is a non-stop talk about SPACs. Whether it's Ackman or Billy Beane from the Oakland As or whoever it is, everybody seems to have SPAC structure that they're launching in the United States. Why has the SPAC structure not worked in Canada to date, as most of the SPACs that came in Canada were unsuccessful in converting their cash raised into investments? And in that vein, do you anticipate any SPACs coming to market in Canada?

ROBBIE PRYDE: OK, well, the SPAC market, well, it's certainly been phenomenally strong in the US, just billions of dollars raised in a relatively short period of time. I wouldn't rule SPACs out in Canada, but we're not likely going to see the same phenomenon as we've seen in the US. I could be wrong, but I base that comment off of the opportunities available and size of those opportunities.

So we have a smaller market, and to capture the attention, you need to have a relatively good-sized deal in an industry that investors are going to care about. So I would say it's very specific, specific situation that needs to work for a SPAC. So we all remember the few Canadian SPACs that were completed a few years back. They more or less executed weak qualifying acquisitions, so that resulted in poor aftermarket trading performance, and that's remembered.

In the US, the SPAC market's been driven by sponsor and management teams that seem to have specific sector expertise. Then they go out and they execute on really successful acquisitions in target sectors. And that's followed up by a resulting public company that trades well in the aftermarket, partly because of the quality acquisition or the company that it is, and then the size where there's enough liquidity.

For Canada, we're a sophisticated market. It competes against private equity, strategic investors, I guess even IPOs that we've been talking about in terms of value delivery, because IPO market valuations are doing pretty well. Things like Snowflake, I know I said US, but so much aftermarket enthusiasm. You have to create that to get your stock trading and trading well afterwards, and it's not an easy thing to do.

So for Canadian SPACs to work, you'd need a SPAC sponsor and management team that is truly recognized by investors as experts in the industry that they're pursuing, and if their eye's on a meaningful acquisition, should and could do well in the public marketplace. So that's how I look at that industry.

PETER HAYNES: It's interesting, too, Robbie, because as I do the rounds in Canada talking to investors, it's pretty surprising how many Canadian investors are focusing on the US SPAC market. They're involved. And so you'd think if the Canadian investors are, to some degree, involved in US SPACs, that if we could find the right management team with the right credibility, that there would be interest in the Canadian market, or following that type of management team through to the end.

And I guess we need one to be successful. I guess there's only been one successful transaction. I think it was a cannabis company, too, if I remember correctly, around the SPACs. So I think we need a win, we being Canada, needs a win in order to get that space rolling again.

So, Robbie, just want to finish up on leadership here, a question that I thought a lot about in particular because of who my guest was today. So because I had the pleasure of reporting to you for 15 years, really at the end of the day, you embody everything that a leader needs to be successful. You are a great listener. You've got empathy, something you referred to earlier as incredibly important through the whole COVID crisis.
Your door was always open, and you're always someone who gives credit to your team for the successes of each business. In fact, we used to laugh that when you'd hold your town halls, you made sure you mentioned at least 20 or 30 names every time to make sure that people in the room got the appropriate kudos for the work they were doing. Who taught you to be a good leader, Robbie, and what's the best piece of advice that you received early in your career that you still live by today?

ROBBIE PRYDE: [LAUGHS] Well, that sounded like a paid commercial, Pete. [LAUGHS]

PETER HAYNES: Nope. This is the truth.

ROBBIE PRYDE: I didn't-- (LAUGHING) yeah, well, thank you very much.

PETER HAYNES: If somebody listened to this entire podcast, then they need to hear that at the end, Robbie, because it's important for sure. But at any rate, I am curious. I want to know who taught you to be a good leader.

ROBBIE PRYDE: Well, I'm not so sure it was taught. I think it's kind of in you or it's not. You can become a better leader, and you can be taught how to be a better leader, for sure. But I've been really fortunate.
So I grew up, people know, on a farm. So I knew the value of a hard day's work. I had a good upbringing from a work ethics point of view, but I don't know, I just always wanted to lead. I always did in school, and always wanted to be the captain in whatever. And so it was in me, for sure.

And then I would say certainly-- paid commercials-- I've worked with Bob a long time, and I've learned a lot. Bob's a tremendous leader. So you're asking specifically. Well, how could I not say that? He's influenced my career and my style quite a bit.

I would also say that from an advice point of view, someone said to me a long time ago, just don't be afraid to surround yourself with really smart people. And I've lived that to this very day, which is be a great partner, be transparent, be honest, be upfront. Just like any relationship, you need to be your best relationship at work, and then surround yourself with the best and highest-caliber people possible.

And being challenged is an awesome thing. I love having really smart, motivated people beside me, because it drives me to greater things. Being challenged should bring out the best in people. So I think that's really good advice is to put yourself in a position where you're working with great people, and let them challenge you and rise to that challenge.

A successful leader today versus, call it 20 years ago when you and I first met, there's some differences. Some of them are the same, for sure. We need to have IQ in this business, or you get run over pretty fast. But the whole EQ, I think, is equally important.

And to be able to be a great leader, I think, especially today, you need to have significant EQ, a good, clear vision. You need to be humble, have integrity, honesty, all the things that lists of great leaders suggest that you need to have. But that truly is what matters most.

Really, at the end of the day, people want to be part of a winning team. Most of us in this business, we like to win, and we want to be surrounded by people that can win and do it the right way. I'm extremely proud of the culture at TD. It's an amazing culture. I work with amazing people, and it makes it fun to be at work, whether it's virtual or the days when you're commingling and being together in offices or flying around the world.

So I think that doesn't come as a fluke. So TD is a place where there's been great leadership. And then for the today, I think it's incumbent upon us to keep growing that culture and to have a leadership style that suits the culture.

And that culture is not being a good place to work and being nice people. It's about winning and being competitive, crushing your competition, but with a smile on your face and really impressing your client and making them want to do business with you. That's what it's all about, so.

And the last thing I'll say is, do not ignore what technology is doing to change everything around you, because it'll run you over as well. Pete, I really appreciated the opportunity to be here. Number 25, so I'm not a leader there, but you're a great host.

PETER HAYNES: Well, look, Robbie, I think about it. We're coming up on the 20th anniversary of the Newcrest merger, and I was at TD Securities prior to that. Chris Finora, Jason Meiers and myself are probably, I think, only the three people that are still-- that were with TD Securities prior to the merger that are still here.
And I must admit, being a TD person, not really knowing the Newcrest team until the merger happened, I think most people cynically believed that it would be a few years, that these Newcrest guys would come in, and they would leave TD a few years later after they've done a good job, but they could move on in life. And who would have thought that 20 years later, Bob Dorrance would be our CEO, and he's been that for, what, 18 years now. Robbie Pryde's head of investment banking.

Bruce Shaw, who's just retiring now, has been the head of institutional sales. Drew MacIntyre, head of our investment banking in our energy group in Calgary and Houston. These are all Newcrest partners that have stayed with the firm 20 years, and I think that owes to the culture that Bob has definitely bred on the entire dealer. And it's a testament to you and Bob and the rest of the folks, that 20 years later, we're still in the same spot and continuing to, as you say, try and fight for our spot in the business.

So, Robbie, it's been a lot of fun here for the last hour chatting with you. And I want to wish you a safe and healthy rest of the year to you and your family, and I look forward to the next time we get to see each other in person. Thanks, Robbie.

ROBBIE PRYDE: Thanks, Pete. Appreciated being on.


This podcast was recorded on September 22, 2020.

Peter Haynes headshot

Managing Director and Head of Index and Market Structure Research, TD Securities

Peter Haynes headshot

Managing Director and Head of Index and Market Structure Research, TD Securities

Peter Haynes headshot

Managing Director and Head of Index and Market Structure Research, TD Securities

Robbie Pryde headshot

Vice Chair and Head of Corporate and Investment Banking, TD Securities

Robbie Pryde headshot

Vice Chair and Head of Corporate and Investment Banking, TD Securities

Robbie Pryde headshot

Vice Chair and Head of Corporate and Investment Banking, TD Securities

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