CIBC World Markets

CIBC World Markets

Type	Division Public company
Industry	Investment bank
Predecessor	Wood Gundy The Argosy Group Oppenheimer Holdings
Founded	1988 (acquisition of Wood Gundy)
Headquarters	Toronto, Ontario, Canada
Key people	Richard Nesbitt, CEO of World Markets
Products	Mergers and acquisitions, Capital markets, Financial services
Revenue	C$12.1 billion [1]
Net income	C$3.3 billion[1]
Total assets	C$342.2 billion[1]
Number of employees	1,100
Parent	Canadian Imperial Bank of Commerce
Website	www.cibcwm.com

CIBC World Markets is the investment banking subsidiary of the Canadian Imperial Bank of Commerce. The firm operates as an investment bank both in the domestic and international equity and debt capital markets. The bank provides a variety of financial services including credit and capital market products, mergers and acquisitions, merchant banking and other investment banking advisory services.

Established via a series of acquisitions, including Canadian brokerage Wood, Gundy & Co. and U.S.-based Oppenheimer & Co. CIBC World Markets has been a leading investment bank in Canada with a notable presence in various international markets at times over the years.

CIBC World Markets is headquartered in Toronto, Ontario with offices in Canada in Calgary, Alberta, Montreal, Quebec, Vancouver, British Columbia and Ottawa, Ontario. In the United States, the bank has a major office in New York, New York with additional offices in Atlanta, Georgia, Boston, Massachusetts, Chicago, Illinois, Houston, Texas and Salt Lake City, Utah. Other offices internationally include: Beijing, Dublin, Hong Kong, London, Shanghai, Singapore, Sydney and Tokyo.

History

CIBC Wood Gundy
(1988 - 1997)

CIBC Wood Gundy

CIBC purchased a majority stake in Wood, Gundy & Co. in June 1988 for C$203 million.^[2] Wood Gundy was established in Toronto in 1905 by George Herbert Wood and James Henry Gundy. At the time of its acquisition, Wood Gundy was the leading Canadian investment dealer. Following the acquisition, the CIBC formed CIBC Wood Gundy, which offered primarily asset management services for corporate and institutional clients. Two years later, in 1990, they continued to expand the Canadian securities business by acquiring much of Merrill Lynch & Company's Canadian business.

For a period of time, CIBC Wood Gundy operated as CIBC Eyers Reed in Australia following the acquisition of the broker-dealer.

Acquisition of the Argosy Group

In April 1995, CIBC's investment banking subsidiary, then known as CIBC Wood Gundy announced the acquisition of The Argosy Group, a New York-based investment banking firm involved primarily in the high yield debt market. Argosy had been founded by three Drexel Burnham Lambert alumni: Jay Bloom, Andrew Heyer and Dean Kehler who had worked together in Drexel's New York office in the 1980s. Argosy was founded in 1990 as a 9-person advisory firm.

The acquisition of Argosy marked an aggressive push by CIBC into the US investment banking business. Prior to that point, CIBC had never done a junk bond deal. Argosy's three major principals had worked on some of the biggest junk bond deals of the 1980s while at Drexel Burnham Lambert. The 52 Argosy employees constituted the core of what would become CIBC's High Yield Group and CIBC Argosy Merchant Banking funds that were responsible for, among other things, the $1 billion windfall that CIBC would earn from its early investments in Global Crossing. The Argosy principals also managed two collateralized debt obligation vehicles known as Caravelle Funds I and II.^[3]

CIBC Oppenheimer
(1997 - 1999)

CIBC Oppenheimer

In 1997, CIBC Wood Gundy (New York) under the direction of Michael S. Rulle acquired the U.S. brokerage house Oppenheimer & Co. CIBC wanted to expand its brokerage business and was interested in the New York-based firm which had annual revenues of $800 million and a network of 680 brokers, primarily selling stocks and bonds. Oppenheimer also included a small investment banking group.

Negotiations began talks with Oppenheimer in July 1997 and CIBC closed on the transaction in November 1997, paying $525 million over the next three years, including $175 million in retention payments to key Oppenheimer professionals. After the acquisition the U.S. division took the name CIBC Oppenheimer, eliminating the use of the Wood Gundy brand through much of the bank.

Creating the CIBC World Markets platform

By 1999, CIBC would scale back the usage of the Oppenheimer name in favor of CIBC World Markets. The business in Canada was centered around providing mergers and acquisitions advisory services and various equity offerings for large Canadian companies. However, with the acquisition of Argosy, the center of gravity of the investment bank began to shift toward the United States.

CIBC World Markets
(1998 - 2002)

Although initially intended to represent a foray into a variety of global markets, CIBC World Markets ultimately focused on three markets: Canada, the United States and to a lesser extent the United Kingdom. The CIBC World Markets unit suffered a net loss of C$186 million during the fourth quarter of fiscal 1998 which dragged down the performance of the parent bank's stock by almost one-third. The loss in 1998 was due primarily to very rapid expansion into regions impacted by the various financial crises in 1998 in Asia. As a result, CIBC World Markets refocused its efforts primarily on the U.S. and Canadian markets, despite the seemingly global ambitions implied in the unit's name.

CIBC World Markets reached a peak in 1999 and 2000, when the investment bank cracked the top ten of U.S. issuers of high yield bonds and the top twenty in mergers and acquisitions advisory. In 1999, CIBC World Markets, backed Gary Winnick and his company Global Crossing to build optical fiber cable connections under the ocean. CIBC would ultimately realize a gain of $2.0 billion from its relatively small equity investment in Global Crossing, representing more than 20% of the bank's profits in 2000.^[4] On the back of the success in Global Crossing, CIBC backed the three heads of its CIBC Argosy Merchant Banking funds in a new private equity operation known as Trimaran Capital Partners. Trimaran closed on a $1 billion fund in April 2001, with capital provided primarily by CIBC.^[3]

In June 2001, CIBC announced the construction of a new $800 million office tower at 300 Madison Avenue (At the corner of Madison Avenue and 42nd Street). The 35-story, 1,200,000-square-foot (110,000 m²) building was originally expected to house up to 3,000 employees, bringing CIBC's entire New York staff under one roof.^[5] Following the crash of the dot-com bubble and the shutdown of the high yield markets in late 2000, CIBC World Markets began to suffer a series of setbacks. When the 300 Madison building was completed in 2004, CIBC's diminished workforce took up only a few floors, leasing the remainder to PriceWaterhouseCoopers.^[6]

Decline of CIBC World Markets

In July 2001, the Wall Street Journal profiled CIBC World Markets, chronicling the rapid decline of the bank from the peaks of Wall Street's league table rankings.^[7] At the same time, the High Yield Group was restructured with the original Argosy Group founders focusing their efforts solely on their private equity and merchant banking operations, known as Trimaran Capital Partners. Bloom, Heyer and Kehler were replaced by managing directors Edward Levy and Bruce Spohler. The Trimaran operations would subsequently spinout completely from CIBC World Markets.

By 2002 CIBC was forced to set aside C$1.5 billion for bad corporate loans, primarily from CIBC World Markets and the bank was linked two of the most famous victims of the corporate accounting scandals of the early 2000s: Enron Corporation and Global Crossing.^[4] As a result of these developments, the parent bank implemented a strategy to reallocate resources away from the riskier CIBC World Markets division in favor of its retail operations.^[4]

As part of this strategy, in 2003, CIBC sold an asset management division along with retail brokerage to Fahnestock Viner along with the Oppenheimer & Co. name. Upon doing so CIBC Wood Gundy (in Canada) and CIBC Oppenheimer (in US) became jointly known as CIBC World Markets. The Wood Gundy nomenclature lives on today as the retail brokerage division of CIBC World Markets Inc., however only operates in Canada; the U.S. operation lacking a retail arm. Also in September 2003, a jury found that CIBC had failed to provide complete financial information to investors in a high-yield bond offering. Just a few months later, at the end of 2003, CIBC reached an $80 million settlement with the Securities and Exchange Commission over its various financings for Enron, representing far more than the bank had earned in fees.^[4]

Sale to Oppenheimer & Co. (Fahnestock Viner)

By 2004, CIBC had begun winding down much of its investment banking business in the United States. CIBC World Markets reduced its staff by two-thirds from 2001 through 2004.

In November 2007, the new Oppenheimer & Co. (Fahnestock) announced that it would purchase a major part of CIBC World Markets' U.S. Investment Banking, Corporate Syndicate, Institutional Sales and Trading, Equity Research, Options Trading and a portion of the Debt Capital Markets business which includes Convertible Bond Trading, Loan Syndication, High Yield Origination and Trading as well as related operations located in the UK, Israel and Hong Kong. The deal closed January 14, 2008 and essentially reunited the original Oppenheimer & Co. which CIBC divided in the sale to Fahnestock.

On February 29, 2008, CIBC World Markets Chairman and Chief Executive Officer Brian Shaw (Encana Corp) was replaced in both capacities by Richard Nesbitt, a former TSX Group CEO.^[8][9]

Notable current and former employees

• Geoff Belsher and Harry Culham, Co-Chair of CIBC World Markets
• Victor Dodig, President and CEO of the Canadian Imperial Bank of Commerce
• Henry Blodget, Equity Research Analyst.
• Meredith Whitney, Equity Research Analyst.
• Guy Adami, TV personality, author, financial analyst and professional investor
• Jeff Rubin, former chief economist, author of Why Your World Is About to Get a Whole Lot Smaller.

See also

• Oppenheimer & Co.
• Wood Gundy Inc.
• CIBC Wood Gundy

References