The recent layoffs by Nesbitt Burns Securities of nearly 12% of its U.S. staff is the first step toward the acquisition of a U.S. brokerage, according to several sources at the firm.
In mid-February, the Canadian broker/dealer, which is owned by the Bank of Montreal, cut more than 30 jobs in equity sales, trading and research in its New York and Chicago offices. That move, according to insiders, represents a decision on the part of senior management that a larger share of U.S. underwriting and sales will be achieved through acquisition rather than expansion.
The layoffs also may be an indication that the proposed merger between the Royal Bank of Canada and the Bank of Montreal, the parent companies of Canada's two largest broker/dealers, RBC Dominion Securities and Nesbitt, won't be allowed by Canadian regulators unless the brokerage firms are kept separate.
"I suspect that we [Nesbitt] are preparing to go it alone and need the added strength of a strong U.S. presence," says a New York-based official at the firm.
Adds one laid-off trader: "I think we are all a little shocked at this change in strategy--most didn't see it coming. The firm had been relatively aggressive in building up its U.S. operations through hiring."
"We all assumed the merger, if approved, would have an impact on employment," says a surviving equity salesman in New York. "But we didn't think it would be this soon."
Representatives of both the Bank of Montreal and Nesbitt Burns refused to comment on the layoffs beyond saying the move was part of a refocused U.S. strategy. But privately, many senior officials are saying the pairing down of the work force is in preparation for acquisition.
Several Canadian firms, including the Canadian Imperial Bank of Commerce and Toronto Dominion Bank, have increased their presence in U.S. markets through acquisitions of domestic brokerages. In late 1996, a division of Toronto Dominion Bank purchased Waterhouse Securities. Last year, CIBC acquired Oppenheimer & Co.