New M&A firm ready for consolidation

Canada’s third largest bank and its top acquisitions and divestitures firm have harnessed up their resources to take advantage of a fragmented North American industry.

Through its Scotia Capital division, Scotiabank acquired Calgary-based Waterous & Co. for an undisclosed amount, gaining 75 employees from offices in Calgary, Houston, Denver, London, Singapore and Gibraltar.

Over the last three years, Waterous has worked with 24 of the 30 largest private sector oil and gas companies in the world on transactions valued at US$15 billion and, this year alone, has had a role in five major transactions totaling US$3.5 billion.

Adam Waterous, president and vice chairman of the new Scotia Waterous unit, said the transaction establishes one of the first firms to combine global, in-depth oil and gas M&A with full-service financing.

It also comes at a time when the North American industry is in a highly fragmented state and ripe for consolidation, said Brian Porter, Scotia Capital’s deputy chairman. There are 600 firms producing at least 1,000 barrels per day and worth more than C$50 million, Waterous said.

He said that with so many firms operated with such a limited range of assets, and with most companies unloading the bottom 5 percent of their assets every year, the stage is set for substantial consolidation.Bringing the two firms together bridges a gap between the specialist dealers working with junior E&P companies and the big banks, which have concentrated on large deals and energy trusts.

Acquisitions and divestitures in Canada exceeded C$15 billion in 2004, compared with C$9.3 billion in 2003, according to Sayer Securities, powered by juniors and trusts and show no signs of slackening this year.

Jeffrey Waterous, who founded his firm in 1987, will also give Scotia Waterous a window on the international deal-making from his base in Gibraltar.

—Gary Park