10 LEXPERT
|
2017
|
WWW.LEXPERT.CA
PHOTO:
SHUTTERSTOCK
BOUGHT DEALS
Even public companies
in the US, accustomed
to lower-cost alternatives,
are starting to see the
benefits of the "bought deal"
mechanism for issuing equity
By Brian Burton
THE
CANADIAN
ADVANTAGE
After three decades as the undisputed
heavyweight champ of Canadian equity markets,
the bought deal may be attracting challengers, but
none of them are true contenders.
Bought deals — in which underwriters buy the
entire issuance from the client company before it's
marketed to the public — have been very good busi-
ness in Canada, accounting for some 90 per cent of
non-IPO (initial public offering) Canadian equity
issuances, year in and year out.
With quarterly bought-deal totals regularly
reaching several billion dollars, Canadian invest-
ment banks as a group earn hundreds of millions
per quarter. e companies issuing the equity get
big no-risk capital injections — which can be dedi-
cated to stated uses — and investors have proven
ready to consistently buy up at least the name-plate
offering, frequently extending to over-allotments of
shares that further reward issuers and underwriters.
Since its introduction by Gordon Capital in the
mid-1980s, experts say, the all-powerful bought
