The results are in for Q3-2013 Canadian M&A and the outlook is decidedly mixed. While Q3 M&A activity rose sharply on a value basis as compared to Q2-2013, Q3 volume was down from last quarter and overall 2013 M&A remains in a slump at the lowest levels in nearly a decade.
Mergermarket’s Canadian M&A trend report highlighted some less than ideal statistics for the Q1-Q3 period, stating that M&A activity during the period actually fell to the lowest levels since Q1-Q3 2004 and was down 34.6% from the same period in 2012. However, it went on to indicate that so far this year we have seen the highest number of announced transactions since Q1-Q3 2007, with 359 deals. The report stated that although large-cap transactions were down around 40% in both deal value and deal count from Q1-Q3 2012, mid-market and small-cap deals were on the rise.
PwC’s Q3-2013 report focused on some more encouraging facts, spotlighting the spike in deal value in Q3 as compared to Q2. There were nine deals in Q3 topping $1 billion, with $54.8 billion of M&A activity overall, up from $38.9 billion in the previous quarter. The retail sector had a particularly strong showing in Q3-2013, but unfortunately the same cannot be said for the resource sector which continues to struggle due to a dearth of oil and gas and mining deals.
Looking forward, PwC provided some encouraging projections for Q4-2013, indicating that Canadian pension funds and real estate parties are expected to continue to be active M&A players, and signaling that China will likely step up its acquisition growth in Canada, with an emphasis on agribusiness. Deloitte’s Q3-2013 CFO Signal Results, which detail CFO’s expectations of deal activity in the next year, were also positive. Nearly half of CFOs expect significant deals in the coming year, mainly because they forecast considerable growth opportunities both domestically and abroad. CFOs in the retail/wholesale sector are the most optimistic, making up two thirds of the CFOs who expect increased M&A. Deloitte’s report notes that the other half of CFOs are not planning to pursue M&A transactions, mainly due to their view that organic growth options are more optimal.
The author wishes to thank Kassy Corothers, articling student, for her valuable assistance in preparing this legal update.