End of an investment era
It’s possible that smaller caps find a way again to be players, but right now it’s not easy
It’s well known that Mike Tims, chairman of Peters & Co. Ltd., keeps such a diligent work schedule he’s packed enough work and accomplishment in his 35-year career to fill at least two, very successful lifetimes.
His workdays regularly stretch to 14 hours, starting with Peters’ morning meeting at 6 a.m. and ending with the closing of the downtown Calgary investment shop at 8 p.m. or later, depending on whether deals are in the offing, and they often are.
Tims is always magnanimous about crediting the team. Yet it’s no accident that during his leadership, Peters stayed at the top of Calgary’s financial and energy communities, expanding through good and nasty commodity cycles, investment shifts and many corporate comings and goings.
So it came as a surprise when Chris Potter, president and CEO of the firm, announced Tims’ retirement in September, effective Dec. 31.
It’s the end of an era. Tims, 59, is Peters’ longest-serving principal and only the second person to lead the energy investment dealer, a big part of Calgary’s oil patch lore. It was founded by Rob Peters and Ray Hugo in 1971 with $40,000 in start-up funds on the main floor of Hy’s, a Calgary steakhouse, because they felt the big banks weren’t covering the energy industry with the local input and urgency it deserved.
In an interview in the firm’s distinguished offices, Tims says he’s looking forward to the next stage of his life — and to letting the next generation, mostly gen-Xers as proficient with technology as with play concepts, put their stamp on the firm.
“Chris Potter and I have worked together for 20 years — he joined us right out of university,” Tims says of his successor. “Somewhere in that time period the student became better than the teacher. He is doing a stupendous job as CEO and we also have great strength throughout the executive committee and the management team of the firm, so in one sense it makes it very comfortable to retire now, because the place is in such great hands.”
If the transition has been smooth, it’s because it’s been a long-time coming.
About 20 years ago, the firm’s principals, including Tims, agreed to sell their interest in the firm to younger staffers in five years starting at age 55.
Tims is down to his last share sale, and while asked to stay sansequity ownership, decided against it.
“One of the things I observed in other kinds of companies and professional firms is that sometimes you lose people out of the next generation because they don’t have visibility and they don’t know how long the senior partners will stay,” he says. “We set up a system that applies to everybody and it’s worked extremely well.”
So well that Peters, with a staff of 90, remains a leading player in Canada’s energy finance community, while so many other boutiques have been swallowed by others. Among them is Waterous & Co., which sold to Scotiabank, and Tristone Capital, which sold to Macquarie.
Peters was repeatedly targeted, but it’s a source of pride for Tims that it chose independence.
“Every time this arises, we look at it and say, ‘ This might be all right, but the model we are on is better, so why don’t we stay doing what we are doing?’ ” he says. “We have a bunch of independentminded people here who might not fit as well in a structure where something has to be approved in Toronto, or New York, or London, or Paris.”
Tims, who earned an MBA from Harvard University and a Bachelor of Commerce from the University of Calgary, joined Peters in 1980 to start the investment banking group. The firm, the first in Canada specializing in oil patch financing and research, had a dozen employees.
Over the years, many of its recruits left to start their own enterprises. Among its notable alumni are Murray Edwards, who started a venture capital branch at Peters and became Canada’s top energy entrepreneur. Mr. Edwards was also one of the founding partners of FirstEnergy Capital Corp., today Peters’ main competitor, and is the chairman of Canadian Natural Resources Ltd.
George Gosbee, who started at Peters in institutional sales, went on to launch Tristone and is now the chairman and CEO of Altacorp Capital. Charlie Locke, who started at Peters as a salesman, went on to own ski resorts, including Lake Louise.
“Mike was one of the true gentlemen investment bankers,” said Murray Edwards. “He gave sage advice, he gave a perspective that wasn’t just short term but looked at the long term. Wherever Michael ends up, they will be lucky to have Mike involved as an advisor and confidant. I was surprised to see him go, because I think Mike is still pretty young.”
Tims was involved in hundreds of transactions. One in particular marked a turning point for the firm, Potter said in announcing his retirement.
“In January of 1996, Mike led the Peters & Co. corporate finance team that advised Alberta Energy Company Ltd. on its acquisition of Conwest Exploration Company Ltd. At the time, this was one of the largest Canadian E&P acquisitions ever completed and this transaction signalled to the Canadian capital markets that Peters & Co. was going to be a force to be reckoned with in the years to come.” Indeed it was, and so was AEC, which eventually took over PanCanadian Energy Corp. to become Encana Corp.
Over the years, the firm grew a large and market-moving energy research team covering all aspects of the energy business, from large integrated companies to juniors, oil prices to global trends, and that is itself followed by industry, investors and policymakers.
The investment banking arm has focused on smaller industry players, the most likely sector to require capital or do corporate transactions. Peters is also involved in institutional sales and trading and has a private client arm.
“One of the things we have been really fortunate about is to identify great management teams and small and intermediate companies that could turn into something bigger,” Tims said. “And that is part of the reason people like investing with us: We ended up with extremely high rates of return for investors … through what I think is a disciplined way of thinking about oil and gas and the sector.”
But fewer junior companies remain in business, and Tims doesn’t expect their ranks to replenish in the foreseeable future.
Institutional investors are favouring bigger names, partly because smaller-cap companies don’t influence their portfolio. Meanwhile, start-ups have to be bigger to take on the oil and gas projects that prevail today.
“When we look at oil sands projects or large-scale natural gas projects to feed LNG plants, these are all more capital intensive than before, whereas years ago there were opportunities where smaller cap companies could get started and work their way up,” he says.
“It’s much harder to do now, because the lands get taken up by very large players, the costs are very high … blocks of lands can cost in the tens of millions and wells cost $ 5- million, $ 10- million or $15 million, depending on depth and complexity. So that is a big shift. I think it’s certainly possible that smaller caps find a way again to be players, but right now today, it’s not as easy.”
Tims has been generous with his time. He has served as the chairman of the Canadian Investor Protection Fund, the Investment Dealers Association of Canada, the United Way of Calgary and Area, and of West Island College (Alberta). The firm’s signature Calgary Stampede event, Firewater Friday, raises big dollars for Calgary charities.
“He has been a giant of a volunteer for United Way and for others in the not-for-profit sector,” said Ruth Ramsden-Wood, the former president and CEO of the United Way of Calgary.
“He was a joy to work with. Our staff loved his passion, his enthusiasm and his humour. His contribution was significant because he put his whole self into whatever he took on. There was always tremendous follow-through on what he said he would do.”
Tims hasn’t announced firm plans for the future. He wants to remain a Peters’ client, will continue to volunteer and is mulling opportunities to sit on corporate boards and in private equity, perhaps on a part-time basis. Whatever the path, he says he will remain as interested as ever in the next big energy ideas.