Recent reports by Mergermarket and Pricewaterhouse Coopers (PwC) have confirmed the positive forecasts for M&A transactions in Q2 2014.  Globally, deal volume has reached its highest level since 2007.  North America, in particular, has seen a strong amount of activity with a number of megadeals listed in the top 10 deals in the world.

North American M&A Review

Mergermarket recently published its Monthly M&A Analysis Insider detailing the robust increase in deal value in Q2 2014.  In North America, there was a 40.6% increase over Q1 2014 in M&A value.  In total, there were 1,291 transactions worth US$430.1 billion.

The report highlights upward movement in key sectors in North America:

  • Pharma, Medical & Biotech: This sector accounted for the largest share of the North American M&A market by volume with 125 deals valued at $106.8 billion. This is a 20% increase by value and a 28% increase by volume from Q2 2013.
  • Telecommunications: This sector saw just 12 deals cumulate a value of $81.3 billion. This is a huge increase over last year when deals totalled $732 million.  These telecommunication transactions represent a remarkable 11,005% increase over Q2 2013  deal volume.
  • Energy, Mining & Utilities: In this sector, there were 179 deals worth $383.2 billion.  This represents an uptick over this time last year.  There was a 189% increase by value and a 58% increase by volume in this sector over Q2 2013.
  • Consumer: In Q2 2014, there were 105 Consumer sector deals worth $20 billion.  The value and number of deals has remained consistent over this time last year.  Q2 2014 represented a 2% increase in volume and a 5% decrease in value from Q2 2013.

M&A Activity in Canada

PwC reports in its Capital Markets Flash that a strong equity market, cheap financing, and healthy cash balances have created a ripe market for Canadian M&A activity.  Q2 2014 represented an increase of 10% over Q1 2014 deal volume and value.  Recent transactions have been driven by demand for cash-rich balance sheets.

Q2 2014 is notable for the increase in volume and value of big deals (deals of over $1 billion). They have increased 10% by number and 39% by value in Q2 2014. Accordingly, domestic deals have declined 28% since last quarter.

Commodities and energy are the sectors that are leading the Canadian M&A market.  Continuing the momentum from Q1 2014, the largest deal announced in Q2 was in the pharmaceutical sector.  The pharmaceutical industry lends itself to high volume deals because of the great value locked in intellectual property acquisitions.  Activity in this sector is likely to continue thanks to the availability of cheap financing for cross-border purchases.

Despite the upward trend in M&A activity, a handful of potential deals in the telecommunications and consumer sectors turned sour in early August.  Whether these failed deals are the heralds for a decrease in M&A activity remains to be seen.

The author wishes to thank Denise Gan, articling student, for her assistance in preparing this legal update.