An Introduction to Edper and Brookfield Asset Management

The first in a four part introductory post on the matryoshka corporate structure that is Brookfield Asset Management

Welcome to Edper, a newsletter about Brookfield Asset Management and related entities.  If you would like to sign up, you may do so here:

The newsletter begins with a long inaugural post broken into four bite-sized pieces, the first of which is below.  In it I introduce Brookfield Asset Management by way of its corporate antecedent and the namesake of this newsletter, Edper. 

Brookfield is an entity with a long history involving a remarkably stable cast of intelligent characters with creative accounting minds.  The introduction will be sent over the next two weeks. Following that, I will scale back the newsletter to once a week or so, largely focusing on current issues.  However, historical context is important. It adds depth and understanding to the current corporate incarnation. So let us begin.

Part I

Setting the Stage

In 1990, Kimberly Noble, a journalist for Canada’s Globe & Mail, began a series of long-form investigative articles called “The Edper Puzzle”.  The series concerned Hees-Edper, a large, Canadian corporate empire built by Edward and Peter Bronfman from an inheritance received from their uncle, Sam Bronfman.  Sam was a one-time bootlegger who built the Seagrams drinks empire. 

Edper’s story is a long one – riches to more riches to rags to more riches again – and it is not over yet.  After many acquisitions, amalgamations and name changes, Edper morphed into Brookfield Asset Management.  A conglomerate for modern times.  Yet, much of Edper’s DNA is still evident.

Ms. Noble’s extensive work on the Edper group was not without controversy.  She covered the companies with a skeptic’s eye for the incongruent details that matter.  Edper had the thin skin befitting a highly levered corporate pyramid that would prefer to avoid public scrutiny.  The companies threatened to sue Ms. Noble and the Globe & Mail several times; one-time Hees International President, William L’Heureux, successfully stopped publication Ms. Noble’s book on the group[1]. 

Management’s desire to carefully control and curate the public narrative is still visible in Brookfield’s public interactions.  Quarterly conference calls are mostly prepared scripts and questions appear limited to friendly, rule-abiding sell-side analysts interested in hearing management opine on the big picture.  The annual Investor’s Day is a similarly light affair.  The odd individual asking what could be perceived as a challenging question has been known to be banned from the event.   

The Bronfman’s money built Edper, but the businesses and how they were structured, were driven by a small group of managers.  The colorful cast of characters that make appearances in Ms. Noble’s articles include Jack Cockwell, the brilliant accountant and mastermind of Edper’s complex, interconnected corporate pyramid; Trevor Eyton, an accomplished lawyer and Canadian Senator who worked with Mr. Cockwell from the beginning.  The supporting cast included George Myhal and David Kerr, to name a few. 

Though not mentioned in the articles, a young accountant named J. Bruce Flatt joined the Edper group in 1989-1990 and would soon emerge as a key force.  At the age of 36, Mr. Flatt would be anointed next leader of the group of companies that would fall under the umbrella of Brookfield Asset Management.

Others that joined the company in the 1990s (or earlier) include Brian Lawson, Sam Pollock, Cyrus Madon, and Bryan Davis.  Each of these individuals occupy senior positions in Brookfield today.  In this day and age, it is unusual to have a large group of managers with  such a long tenure at a single company. 

What engenders such strong loyalty through the rise and fall and criticism and rebuilding, particularly when headline pay is noted to be relatively modest? 

This apparent devotion is, indeed, just part of what forms the strange allure of Brookfield Asset Management.

Raison d’etre

So why should you be interested in Edper, a Brookfield specific Substack, anyway? 

Brookfield is a large, powerful company few know or understand well.  I intend on changing that.  I will address what I believe are critical issues within the group.  Not all readers will be happy with what I have to say, but there will be interest.

At last count there were 131 hedge funds and other institutions that owned more than $20M of BAM stock.  There is roughly $100B of market cap Including the public affiliates.  There is a lot of investor capital on the line.  Then there are prospective investors and short sellers.  All investors, long and short alike, may find my work helpful in either bolstering or disproving their investment thesis in Brookfield related entities. 

Fiduciary duty calls, and they need to know.

Additionally, Brookfield’s competitors, such as other private equity managers may find my writing leads to an “Aha” moment, illuminating how and why Brookfield does what it does.

Lastly, journalists and business historians in the know find Brookfield a fascinating, if complex and unwieldy, entity, and given its history, are curious as to how the story will unfold and ultimately end.  I know I am.

Please share, sign-up, or unsubscribe; and feel free to comment and give feedback.  I’ll be happy to hear from you.

[1] http://www.julianporterqc.com/press/defenders-of-the-pen/