2013 started off slowly with a downturn in Q1, and Q4 brought the year to a close with mixed results. M&A activity in Canada resulted in 567 deals valued at US $71.8 billion. The year was the slowest by deal value since 2004 (US $42.3 billion); by contrast, deal count was the highest it has been on Mergermarket record since 2001.
What brought about these mixed results?
Transactions valued over US $250 million were scarce. 42 large-cap transactions, worth US $54.4 billion, were completed in 2013. However, this number represented the lowest (in deals and in value) since 2004, when the same number of transactions represented US $29.4 billion.
The Energy, Mining & Utilities sector has historically been a heavy-hitter when it comes to large-cap transactions in Canada, but this year the market share fell 17.8%. Instead the consumer sector (representing US $19.1 billion) reigned supreme.
Still, deals were being made. Mid-market and small-cap transactions drove the M&A Canadian market and represented 525 deals worth US $17.4 billion—a 26.7% increase in deal value and a 21.5% in deal count compared to 2012. The question now looming is whether these numbers will continue to increase in 2014.
Using statistics based on the number of virtual data rooms opened (or proposed) for the purpose of conducting due diligence on anticipated transactions, the Intralinks Deal Flow Indicator (DFI) recorded a significant increase in early stages of M&A transactions in the last quarter of 2013. Increases were noted in the following industries:
- Financial services – early stage M&A activity increased by 10% in Q4 2013, as compared to 2012
- Life sciences – an increase of 63% of transactions reached the due diligence phase in Q4 2013
- Real Estate – early stage deals increased by 82% in Q4 2013
- Energy – early stage transactions increased by 10% in Q4 2013
Looking forward in 2014, DFI is predicting the market turnaround that so many were hoping for last year.
Despite the relatively muted overall level of recorded announced M&A deals in Q4 2013 … we see enough evidence to indicate a strong likelihood of increased global M&A activity in 2014. Both the results of the Intralinks DFI and the increasingly positive tone of many economic indicators – upgraded global growth forecasts, falling unemployment and robust job creation data, positive business and consumer confidence surveys and rising house prices in the majority of the world’s largest economics – support the hypothesis that 2014 could prove to be the year that the world finally begins a new cycle of recovery, almost seven years after the onset of the global financial crisis.
With recorded growth in Q4 2013 and the early stages of M&A on the rise (26% jump in 2013 compared to 2012), there is hope that 2014 will be the year that goes out like a lion.
The author wishes to thank Kimberly Grange, articling student, for her valuable assistance in preparing this legal update.