TORONTO (Reuters) - Canadian mining-focused investment bank Edgecrest Capital has put itself on the auction block, hurt by a prolonged downturn in the natural resource sector that has hit fees and activity, according to two sources familiar with the situation.
The move comes two years after Toronto-based Edgecrest, which is led by investment banker David Beatty, opened shop. The company acquired boutique dealer Stonecap Securities Inc and its U.S. unit last year and made some hires earlier this year.
The news underscores the challenge many small and mid-market investment firms encounter in Canada, as weak commodity prices and higher costs amid increased regulatory scrutiny jeopardize their ability to stay afloat.
Beatty did not immediately respond to requests for comment. Edgecrest’s chief financial officer, Conrad Beyleveldt, said, “I’m not in a position to be able to give you a confirmation of that,” referring to the sales process.
Commodity prices have fallen sharply in recent years, and a plunge in bullion prices earlier this week exacerbated the pain the industry is feeling. The volatility in prices has made it harder for mergers and acquisitions, as well as capital raisings, in the sector.
Beatty aggressively expanded the operation hoping to take advantage of a potential turnaround in resource prices, the two sources said.
Beatty has been disappointed that commodity prices did not bounce back as expected and that he could not bring on board some marquee names to boost Edgecrest’s profile, said a third source familiar with the fund.
Investment dealers or banks that may show potential interest in Edgecrest include Paradigm Capital, Clarus Securities, Dundee Securities and Mackie Research Capital, two of the sources said.
Edgecrest could also be looking at U.S. investment dealers seeking to expand into the Canadian market, one of the sources said.
Edgecrest has advised on mining and energy transactions, and its divisions include investment banking, research, and sales and trading, its website says.
In 2013, Stifel Nicolaus closed its Canadian unit and Fraser Mackenzie Holdings wound down its operations. In 2014, Mackie Research Financial agreed to acquire Jennings Capital Inc. Many others have trimmed staff headcounts, shut down or merged with other companies in the last three years.
(Story corrects name of CFO to Beyleveldt, not Beyleveldtm in fourth paragraph. )
Reporting by John Tilak and Euan Rocha; Editing by Leslie Adler