Canadian mergers and acquisitions survived 2012 collapse

Canadian mergers and acquisitions defied gravity in 2012, surviving a 10% decline in the total number of deals completed during the year, says a study published Thursday by KPMG Corporate Finance.

According to the report, the overall number of M&A this year in Canada reached $139 billion, which represents a modest rise compared to last year’s deals.

KPMG Corporate Finance president Peter Hatges, said the M&A deal value results are surprising given Canada’s 50% decline in deal values in the mining and materials sector, which represented a drop of over $18 billion over last year.

The total number of M&A deals across all sectors involving Canadians is expected to amount to approximately 1,820, said the firm, which based its outlook on data provided by Thomson Financial.

“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,” said Hatges.

He added that —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.

Deal values in Consumer Products, Media and Entertainment, Healthcare and Consumer Staples were all up over last year. Highlights include:

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

While takeovers and mergers in the global mining sector slowed radically this year as a result of lower commodity prices, Canadian companies led the vast majority of massive Canadian M&A deals in 2012, with many foreign targets being in the United States.

“Canadian companies have a lot of capital at their disposal,” said 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.

“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,” concluded Hatges.

Image: Jonny Picture’s photos via Getty Images.

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