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Second quarter a deal bonanza for Canada
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The Globe and Mail- Canadian companies had their busiest three months of deal making since the credit crisis hit in 2008, according to PricewaterhouseCoopers LLP, doing 836 deals worth $57-billion in the second quarter as “mega deals” returned to the market.
The majority of the deals were in the materials, energy and financial sectors at 61 per cent. There was a “notable” surge in the consumer discretionary, information technology and industrial sectors, which together accounted for 31 per cent of the deals.
The number of deals increased by 10 per cent over the second quarter of 2010, while the dollar volume jumped 64 per cent.
“The second quarter was characterized by dismal global news,” the report states. “Athens burned, a Japanese nuclear meltdown was narrowly averted and for the first time in history the creditworthiness the U.S. was called into question. Capital markets are confused and the consensus is that the recovery is extremely fragile. It’s bad news all around – except for the Canadian merger and acquisition market.”
The report said 16 deals worth more than $1-billion – so called megadeals – made a comeback in the quarter. Some of the deals included Barrick Gold’s pending $7.8-billion acquisition of Equinox Minerals, a technology consortium bidding $4.5-billion Nortel Networks patents, and Intact Financial’s $2.7-billion takeover of AXA Canada.
The mid-market segment – deals worth $100-million to a billion – saw 71 deals.
“Across all market segments, acquisitions were largely horizontal, pushed by buyers seeking to deploy excess cash and capitalize on access to cheap financing against a backdrop of weak organic growth,” the report states.
The report also noted a “frenzy” in real estate markets, with 90 deals accounting for $9.7-billion. The deals were concentrated in Europe, Canada and Australia. The surge of activity is a “relatively new phenomenon” driven by low interest rates – in the last 10 years the dollar value of real estate deals involving at least one Canadian company has increased by 1,119 per cent.
“The key driver of this trend is an intense thirst for yield by institutional and retail investors,” the report states.
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