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December 31, 2014 | Y/E Reports 

Crosbie & Company Canadian Mergers & Acquisitions Yearly Report for 2014

Overview

The Canadian M&A market rebounded strongly in 2014 after weakening the prior two years. Analysis prepared by Crosbie & Company using Capital IQ and other sources indicated 2,869 announcements in 2014, up 13% from 2013, and consistent with activity level from 2010 through 2012. 

In terms of value, announced transactions surged $45B to $238B in 2014, a 23% year over year increase, and the highest level in the past 5 years. The increase in transaction value was the result of strong mega-deal activity. 

As highlighted below in this report, the increase in activity was relatively broadbased, occurring across virtually all industry sectors and size categories.

Mega-Deals

In 2014, there were 42 mega-deal transactions (transactions in excess of $1B in value) for an aggregate value of $153B. This represents the highest level of mega-deal activity, in terms of value, since prior to the financial crisis.

The largest transaction of the year was the acquisition of Talisman Energy by Spanish energy giant Repsol for $15.7B. This transaction was announced in Q4 after Talisman shares had already fallen over 60% in three months as world oil prices collapsed amid a supply glut.

Additionally, Canadian coffee and doughnut icon Tim Hortons was acquired by Brazilian private equity group 3G Capital for $14.6B in a transaction that combined Tim Hortons with Burger King, a 3G portfolio company, to form NYSE-listed Restaurant Brands International.

Cross-Border

Cross-border transactions continued to account for a significant proportion of activity with 38% of all transactions involving a foreign target or buyer, demonstrating the global nature of the Canadian economy.

Canadian companies were active in making foreign acquisitions abroad, outnumbering foreign acquisitions of Canadian businesses 1.8:1, which is the continuation of the long term trend of Canadian companies being more acquisitive than foreigners have been active in acquiring Canadian companies. Canadian companies also exceeded their foreign counterparts by nearly 2.1:1 in terms of spending. Each of the top 10 largest transactions in 2014 were crossborder deals.

Financial Sponsors​

To get a sense of financial sponsor activity, we track transactions in excess of $100M. Financials sponsors remained active in 2014 on both the buy-side and sell-side with 61 transactions valued at $75B in total. 7 of the 10 largest transactions involved a financial sponsor, including Onex Corporation and Canada Pension Plan divesting of Dutch auto parts manufacturer Pinafore Holdings to the Blackstone Group for $8.0B. BC Partners and the Caisse de dépôt were part of a consortium of capital groups that took US retailer PetSmart private for $10.3B.

Industry Sector Activity

The Real Estate sector was the most active sector for the third consecutive year, with 465 transactions worth $30B in aggregate. Although the number of transactions was up 4% from 2013, deal value actually declined 56% from the record $69B in the prior year. Ivanhoe Cambridge, the real estate investment arm of the Caisse de dépôt, along with its partner Callahan Capital Properties acquired 1.2 million square feet of Manhattan office space for $2.5B.

The most active industry sector by value was Consumer Discretionary with 280 transactions valued at $59B. In addition to the Tim Hortons and PetSmart transactions, other notable deals in the sector included TSX-listed online gaming company Amaya, Inc., which became the 800 pound gorilla in the space by acquiring UK-based Rational Group for $5.3B.

The Energy sector remained active with 332 transactions valued at $53B. The largest Energy transactions included the $15.7B Talisman Energy deal as well as Encana’s $7.8B purchase of Athlon Energy, expanding its presence in the non-conventional oil sector.

Mid-Market

The mid-market continues to be the foundation of the Canadian M&A market with transaction volume for deals under $250 million representing 90% of all the transactions with disclosed values. In aggregate, mid-market transactions were valued at $40B or approximately 17% of total M&A value. Historically, announced mid-market transactions have represented approximately 90% of announced transactions, consistent with 2014.

In 2014, transaction size was not disclosed for 49% of transactions, up from 44% in 2013. While this limits the precision of inferences we can make about the size distribution of transactions, it is reasonable to assume most of the undisclosed deals are within the mid-market as we define it here.

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