Canadian M&A continued its decline in Q1 2013, reaching lows not seen since Q1 2009.   According to Crosbie & Company Inc.’s Q1 2013 M&A Report, which compared M&A activity results from Q4 2012 to Q1 2013, the market has declined significantly both in transaction value (51%) and volume (35%).  Specifically, while Q4 2012 saw 301 transactions valued at $52.8 billion, Q1 2013 saw 196 transactions valued at $25.9 billion.

PricewaterhouseCoopers (PwC) noted similar trends in their recently released report, Capital Markets Flash: Q1 2013 Canadian M&A Deals Quarterly, including that:

  • the decline in Canadian M&A activity was largely due to sector specific issues and a slowdown in Canada’s generally buoyant natural resources sector (which represented only 8.9% of total M&A deal value this quarter).  This may be largely attributable to increasing investor caution and declining commodity prices;
  • the real estate sector was Canada’s most active sector by deal value (36.6% of total M&A activity).  The acquisition of Primaris Retail REIT by H&R REIT for $4.6 billion represented the largest M&A deal of the quarter;
  • overseas pension fund acquisitions accounted for three of the largest M&A deals in Q1 2013 and represented over half of the ten capital group transactions;
  • cross-border activity accounted for over 40% of announcements in Q1 representing a major driver of activity in the Canadian market. Canadian firms engaged in more acquisitions overseas than their foreign counterparts by a ratio of 2.2:1; and
  • there were only three Canadian M&A transactions valued over $1 billion in Q1 2013.

Will the Canadian market see an increase in M&A activity for the remainder of 2013?  Mark Jamrozinski, M&A transactions services leader with Deloitte, states: “I don’t think the volume has fallen off a cliff, but I also don’t think it’s going to rebound in some record-setting pace either. And I think the uncertainty in the macro economy is going to continue to cause people to be very cautious, as they approach growth opportunities.”

The author wishes to thank Victoria Riley, summer student, for her valuable assistance in preparing this legal update.