Canadian M&As defy gravity in 2012

The Canadian M&A market defied gravity in 2012, surviving a 10% decline in the total number of M&A deals completed, with a modest rise in total M&A deal values to approximately US$139 billion, says KPMG.

The firm found the M&A deal value results are surprising given Canada experienced a 50% decline in deal values in Canada’s biggest sector, materials & mining, representing a decline of over US$18 billion over last year.

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The drop in actual deal volume may seem disconcerting, as the Canadian environment for M&A is strong given the robust banking market, an abundance of equity capital and a relatively strong economic climate.

“Despite the weakness in mining and commodity prices, many other sectors showed signs of strength, taking up the slack in mining M&A deal value,” says Peter Hatges, president, KPMG Corporate Finance, Inc.

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Highlights by sector include:

• The acquisition of Maple Leaf Sports and Entertainment for US$1.3 billion
• The US$6.6 billion acquisition of Cequel Communication in the U.S. by a private equity consortium that included CPP Investment Board
• Cogeco’s US$1.36 billion acquisition of the Atlantic Broadband Group in the U.S.
• Bank of Nova Scotia’s US $3.2 billion acquisition of ING Bank Canada
• Valeant’s acquisition of Medicis Pharmaceutical Corp in the US for US $3.1 billion

In 2012, Canadians acquired the vast majority of the largest Canadian M&A deals with many foreign targets being in the U.S.

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“Canadian companies have a lot of capital at their disposal,” says Martin-Pierre Roussel, managing director, KPMG Corporate Finance, Montreal. “Canadian banks are lending, private equity is flush with cash and the Canadian dollar is well valued—it’s a significant strategic advantage in the context of M&A deals and expanding the geographic footprint of Canadian companies.”

Changing demographics in Canada are another factor in the expected volume of M&A transactions going forward.

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“As Canadian business owners reach retirement age, a large number of businesses and assets will come to the market in volumes not seen in prior years and this is expected to continue to stimulate the M&A activity in the non-mining sectors,” adds Hatges.

The total number of deals across all sectors is expected to reach about 1,820, according to Thomson Financial.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.