In 2013, Danny founded an IIROC (now CIRO) investment dealership called Harbourfront Wealth Management, to bring pension-type investment vehicles such as private equity, private real estate, and private credit to Canadian retail investors.

Danny launched Harbourfront with an $11 million personal investment and within nine years, established a $425 million enterprise value when Boston-based Private Equity firm, Audax Group bought a stake in the firm.

In an exclusive interview with International Finance, Danny Popescu, CEO of Harbourfront Wealth Holdings, shares insights on the firm’s recent acquisition of KJ Harrison & Partners, emphasises the importance of transparency, discusses future acquisitions, and touches on other key topics.

What strategic factors made KJ Harrison & Partners the right fit for Harbourfront Wealth’s latest acquisition?

We look for like-minded, profitable wealth management practices that value independence and put the client first. KJ Harrison (KJH) has an exceptional reputation in the wealth management community, with a strong track record of performance and growth. Their business acumen and vision for the future aligned well with Harbourfront Wealth, making them an ideal candidate to join our firm.

With Harbourfront’s AUA nearing CAD 11 billion, how do you plan to maintain a personalised client experience at scale?

Our model is designed to support advisors in maintaining a personalised approach to their clients. We do not dictate their approach or offerings. One key way we support our advisors is with our advanced technology. We provide best-in-class solutions that make day-to-day tasks more efficient and free up advisors’ time to focus on serving their clients. Some examples of this include our integrated data lake and unified experience, digital onboarding, and straight-through processing (trading by the next day). We are also developing a client portal with automated reporting, which we are planning to launch this summer.

Recently, you spoke about the importance of independence and transparency. In what ways do these values influence how you choose and approach acquisitions?

We partner with advisory teams and wealth management firms that have been successful in building reputable and profitable practices. Each team has its secret to success, and we believe it is important to enable them to continue growing in a way that works for them. We give our advisors the freedom to recommend any security they determine is best for their clients, define their own brand, and communicate with their audience in their own voice. We believe independence is the key to succeeding on behalf of clients, and we look for advisors who will thrive in an independent environment.

What specific synergies do you expect between Harbourfront and KJH, both culturally and operationally?

The KJH operating model is unique, and this acquisition will not disrupt their model. In fact, our goal is the opposite. We will look for additional advisors to join and benefit from the KJH model. From an operational standpoint, we are assessing common systems, applications, and vendors to take advantage of additional scale in our pricing models.

How does this acquisition position Harbourfront to compete with larger, bank-owned wealth management firms in Canada?

The industry recognises the benefit of independence in wealth management, and the KJH acquisition further emphasises this trend. KJH is an established and recognised High Net Worth and Family Office boutique, and choosing to partner with Harbourfront deepens our clout in the industry. Wealth management advisory practices are seeing the advantage of joining an independent firm instead of the more bureaucratic, less flexible, bank-owned firms.

What innovations or investment solutions can clients expect to see emerge from this new partnership?

Harbourfront has developed a robust platform of multi-asset solutions across both public and private asset classes. KJH broadens the Harbourfront Wealth expertise into bespoke portfolios built for private clients.

How will the integration of KJH’s CIRO-registered dealer enhance Harbourfront’s compliance and regulatory capabilities?

Both KJH and Harbourfront have strong compliance resources and oversight capabilities, and now we will be able to leverage both.

Can you share how your leadership approach has evolved as Harbourfront grows and completes major acquisitions like this one?

We have developed and grown a leadership team with deep operational knowledge, which gives us the expertise to know what to look for in potential acquisitions and how to avoid surprises post-acquisition. The strength of my team and their ability to absorb growth and scale our business is what sets us apart.

What trends are you seeing in the independent wealth management space, and how is Harbourfront positioning itself to lead?

We are seeing a large move toward private market investing. Institutional investors have been investing in private markets for decades, but this space has been inaccessible to everyday investors due to regulatory hurdles, high minimums, low liquidity, and lack of expertise. We have led the way in the industry, in bringing private market-related investments to everyday investors (starting in 2018), and we are seeing other firms starting to follow our lead. Our private markets expertise is one of the key reasons advisors choose to join Harbourfront.

Another trend that is resonating with advisors is the move toward firm ownership. When we partnered with Audax Private Equity in 2022, our advisors received handsome cheques through a partial monetisation event. In a couple of years, we will do it again, and four to five years after that, we will be on our third partial exit. Historically in Canada, independent shops often sold to banks or other conglomerates. No advisor desires that in today’s environment, which makes our model refreshing. Given that private equity investors are not operators, we will continue to maintain our independence while creating periodic liquidity events for our advisor shareholders.

Looking ahead, do you anticipate further acquisitions, and what qualities will you seek in future partners?

We are looking to close on a fourth acquisition in July and continue to explore others where cultural alignment exists and the deals are economically accretive.

What factors make Harbourfront an attractive acquirer for so many wealth management firms?

Harbourfront is unique in the industry, with a collegial and supportive culture and leading-edge technology that makes it easier for advisors to serve their clients. We are also extremely efficient from an economics point of view, which makes us highly profitable—and advisors get to share in those profits.

Why is Harbourfront making these acquisitions?

We want to be the independent wealth management firm of choice in Canada. These acquisitions enable us to accelerate growth and scale effectively.

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Leveraging M&A as a Growth Engine – The Green Investing

Green investing is one of the most interesting approaches in M&A and presents itself as a thematic M&A opportunity that is gaining popularity in global markets. Interestingly, early indications of such acquisitions demonstrate considerable outperformance from a shareholder value creation standpoint. Companies that prioritise sustainability can create value through a variety of channels, including improved finance availability and lower fund costs, higher market valuation, operational cost savings from decarbonisation-related efficiency gains, and so on.

While M&A can be a powerful value-creation tool and a growth engine for most firms, especially in today’s market environment, strategic, financial, and operational discipline and focus are important to unlocking not just strong but also long-term value from transactions. Buyers must aggressively seek targets with the correct strategic fit, develop razor-sharp conviction in the business case, and establish best-in-class integration skills in order to realise the maximum value potential. Sellers must understand their future investors’ demands, create compelling proof points to back up their equity narrative, and plan ahead of time to mitigate any separation issues.

Companies that create M&A expertise and apply a systematic approach to acquisitions will win the race to reform India’s sectors and capture a large piece of the country’s spectacular growth in the coming years. Furthermore, for global businesses, it is important to invest only in consistent and active portfolio management, as well as other practises like ecosystem sourcing, target cultivation, and building culture and integration capabilities. This will help in mitigating the external pressures thereby expediting the M&A process, while delivering consistent value through M&A.

Global M&A Growth

The world of M&A, has seen an unparalleled upsurge, and it has become a key factor in the global economy and industry’s transformation. This spike in M&A activity is indicative of a time of strategic consolidation, heightened by globalisation, technological development, and changing market conditions. Geographical borders do not affect the transformative power of M&A, which unites businesses from various industries and geographical areas in search of synergies, market expansion, and competitive advantage. A number of factors have contributed to the global growth of M&A in recent years. In order to expand into new markets, diversify their product lines, and take advantage of synergies to strengthen their competitive positions, businesses are looking more and more for inorganic growth opportunities.

Additionally, because technological innovation is redefining industries at a rapid pace, businesses are being forced to engage in M&A in order to acquire disruptive technologies or gain a competitive advantage in the digital space. Furthermore, advantageous economic circumstances, like low interest rates and strong investor confidence, have created an environment that is conducive to M&A activity and has sparked a surge in deal-making across all industries. Market globalisation has accelerated cross-border M&A growth by allowing businesses to take advantage of opportunities outside of their home countries.

Global M&A Challenges

The global M&A market faces a challenging 2022 with M&A volumes and values declining from record-breaking highs (65,000 deals) in 2021 – respectively by 17% and 37% – although remaining above 2020 and healthy pre-pandemic levels. In the second half of 2022, deal volumes and values declined by a greater portion – by 25% and 51%, respectively – compared to the year prior. Regardless of market cycles, the programmatic strategy aids in effective M&A.

Companies across sectors should aim for a minimum of two to four small or medium-sized acquisitions per year. This helps in creating the required difference from peers and generates higher TSR (Target Shareholder Return) with less risk. According to McKinsey, programmatic acquirers’ median annual returns to shareholders outperformed their counterparts by 2.3% between 2013 and 2022.

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What lawsuit says
“Musk apparently believes that he – unlike every other party subject to Delaware contract law – is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away,” said the lawsuit.

According to the statement, Musk entered into a legally binding arrangement in April of this year and is ending it because “it no longer serves his personal interests.”

The lawsuit accused Musk of “a long list” of violations of the merger agreement that “have cast a pall over Twitter and its business.”

Why Musk canceled the deal
According to Musk, there are mainly three reasons first that Twitter had broken the terms of the agreement by not providing sufficient details regarding spam accounts. Second, Twitter had misrepresented the number of spam accounts in its disclosures to the US financial watchdog and third that the company had broken the agreement by not consulting Musk when firing senior employees recently.

What’s next?
In an effort to quickly resolve its legal matter before the deal’s completion deadline of 24th October, Twitter has asked a Delaware court to set up a four-day trial for its lawsuit in the middle of September. “The facts they marshal in their complaint give them maximum leverage to negotiate should they so wish,” says Brian Quinn, an associate professor at Boston College law school, the Guardian reported.

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He said that Twitter is not providing him with the necessary data to facilitate an evaluation of the number of spam accounts there are.

On Monday, a letter to Twitter’s Chief Legal Officer Vijaya Gadde was disclosed in a regulatory filing. Musk’s lawyer Mike Ringler stated that he has a right to the requested data. This information will help further finance the $44 billion deal.

He even said that Musk reserves all rights arising from this material breach of merger agreement duties, including the right not to finalize the acquisition and cancel the merger agreement.

A Twitter spokesperson has said that the company will continue to share the necessary information with Musk to ensure the merger.

Texas Attorney General Ken Paxton announced an investigation into Twitter on Monday, alleging that the business may have falsely reported its bogus bot accounts in violation of the Texas Deceptive Trade Practices Act.

Paxton’s office has demanded documents detailing how Twitter calculates and handles its user data and how that data connects to its advertising businesses. Twitter has until June 27 to reply to Paxton’s demands.

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Following Musk’s remark about putting Twitter on hold, the price of its shares fell in late afternoon trading on May 16 itself.

The stock fell more than 8% to settle at $37.39, lower than when Musk announced his Twitter stake in early April, raising worries about whether the billionaire entrepreneur would complete the deal at the agreed price.

Twitter Chief Executive Officer Parag Agrawal tweeted earlier on May 16 that internal estimates of spam accounts on the social media network for the last four quarters were far under 5%, responding to days of criticism by Musk of the company’s handling of phony accounts.

Twitter’s estimate, which has remained the same since 2013, could not be reproduced externally given the requirement to use both public and private information to evaluate if an account is spam.

Musk responded to Agrawal’s defense of the company’s methodology with a poop emoji on Twitter. In his tweet he wrote, “So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter.”

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As told by Elon Musk at a TED conference, which was held earlier this month, that he is not interested in Twitter as a business. According to him, he has a strong, intuitive sense that having a public forum that is more and more trustworthy and broadly inclusive is very important. In an SEC filing in April, Musk wrote, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.”

A few years back, Twitter executives had dubbed the company the “free-speech wing of the free-speech party”.

However, with the presidency of Donald Trump, the January 2021 Capitol riots and the COVID-19 proved that free speech had shortcomings. Due to the Capitol riots, Donald Trump was blocked from accessing Facebook, YouTube, and other such platforms.

It has been stated that almost 5.9 million of material in the first half of 2021 was related to misinformation about COVID and other related topics. At the same time, 1.2 million accounts were suspended which totals more than 700,000.

The whole reason behind Elon Musk buying the company was to publish Twitter’s code which included the recommendation algorithm. He has even proposed to remove all the spambots, and rely less on advertising and more on subscriptions.

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The acquisition is part of WeLab’s broader plan to expand in Southeast Asia. It is being reported that WeLab will launch a digital bank in the country.

The funding round concluded by the WeLab led consortium could potentially be the largest funding round by a fintech company in Indonesia this year.

As per the deal, the consortium, called WeLab Sky, will acquire the stakes of Bank Jasa Jakarta to become its sole controlling shareholder. Previously, WeLab Sky bought a 24 percent stake in the bank, while the remaining shares for majority control will be transferred upon securing regulatory approvals.

Simon Loong, founder and group chief executive officer of WeLab told the media, “We continue the journey that we started in 2018 to build one of the first pan-Asian digital banking platforms, first in Hong Kong and now in Indonesia. WeLab combines its advanced digital banking technology with the BJJ network to further grow the bank’s business towards a bright digital future.

“BJJ has earned an excellent reputation for being a trusted retail bank in the market over the last 40 years. We look forward to building on this foundation with our fintech expertise, and success of operating a licensed digital bank in Hong Kong, to build a tech-driven digital bank that will be financially inclusive for the people of Indonesia.”

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The company’s payments platform also accepts third party payments with the help of API integration and the company’s credit-related products aggregate multiple credit providers such as banks and fintechs. Currently, Adumo boasts over 50,000 active clients and 90,000 active card machines that process payments in excess of R80 billion in transaction value in 13 African countries.

The company also has multiple companies within its growth structure such as Sureswipe, iKhokha, Adumo Online, Humble Till, Innervation Pan African Payments, Innervation Rewards, GAAP, and now SwitchPay.

Paul Kent, CEO of Adumo told the media, “The impact of the pandemic and the rise of new, more convenient and value-adding payment options is revolutionising how South Africans purchase goods and services. The team at SwitchPay has built a world-class suite of alternative payment solutions that brings new forms of value to consumers and retailers alike. We look forward to working with the team as we bring convenient new payments within reach of all South Africans.”

“We now have an established partner in payments that we can learn from whilst leveraging one another to unlock growth opportunities. This investment allows us to shift our focus to scaling the business through delivering on our core purpose of growing our merchant partners by providing their customers access to affordable and responsible financing products.”

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