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February 28, 2023 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q4 2022

A Better Quarter in a Market That is Still Settling

In Q4 2022, announced Canadian M&A transactions increased after a seeing a decline in the previous three quarters.  In the most recent quarter, there were 758 announced transactions, up 11% quarter-over-quarter, with total deal value climbing to $90B.  While headed in the right direction, quarterly activity was down -20% relative to Q4 2021.  On a full-year basis, there were 3,040 announced transactions, representing the lowest annual deal count since 2017 which saw 2,991 announced transactions.

“The increase in Q4 was encouraging and hopefully, we’ve seen the bottom of this cycle.  But it seems to us like the market is still trying to find its new equilibrium,” said Colin Walker, Managing Director of Crosbie & Company Inc.  “Both buyers and sellers have had to adjust in order to assess opportunities in the new markets which we face.  New conditions include higher interest rates which impacts leverage and the cost of capital, and inflation, among other things”.  

Mid-market transactions (those with values under $250M) represented 88% of all deals with disclosed values and 7% of the aggregate value across such deals.  Notable mid-market transactions included Carlsberg Group, an international brewery giant based out of Denmark, acquiring Waterloo Brewing, an Ontario-based craft brewery.  This deal follows the acquisition of Ontario-based Amsterdam Brewing by Royal Unibrew in Q3, another large Danish brewer, and occurs against a backdrop of consolidation in the Canadian craft beer market, which saw 6 announced deals in Q4 2022.  Among those deals, Crosbie advised Side Launch Brewing Co. on its sale to Equals Brewing Company.

Meanwhile, mega-deal transactions (those with values above $1B) were much higher in terms of deal value (+63% quarter-over-quarter) despite the lower number of announced transactions (8 deals relative to 14 in Q3 2022).  Brookfield Corporation dominated the league table with 3 announced mega-deals representing $29B in value, including the $16B acquisition of Origin Energy Limited, an Australian-based producer and distributor of natural gas and electricity.  The Canadian Financial Services industry was active in the quarter, with Royal Bank of Canada announcing their intent to acquire HSBC Bank Canada for $16B and Stephen Smith announcing his proposed acquisition of Home Capital Group, adding to his Financial Services empire. 

Canadian firms made 517 acquisitions in the quarter, of which 305 (59%) involved domestic targets. Cross-border activity remained relatively flat in Q4 2022 at 338 transactions, down from 341 transactions in Q3 and representing 45% of all deal activity. 

From a sector viewpoint, deal count increases were seen across most industries, with Metals and Mining (+30), Industrials (+29), and Information Technology (+16) leading the pack. Real Estate experienced the largest decline in deal count (-25), followed by Utilities (-6) and Communication Services (-3).  Industrials and Financial Services generated the largest aggregate deal values at $20.5B and $18.5B, with mega-deals representing 90%+ of the aggregate deal value in both industries. 

Overview

  • Deal activity picked up in Q4 2022 with 758 announced transactions, an 11% increase compared to Q3 2022 
  • Aggregate deal value ($90B) was up by 44% relative to Q3 2022, with mega-deals representing 77% of total deal value ($69B)
  • Canadian firms made 517 acquisitions in Q4 2022, of which 305 (59%) involved domestic targets with the remainder involving foreign targets
  • Cross-border deals represented 45% of all activity in Q4 2022, with the majority spanning Canada/U.S. 

Mega-Deals 

  • There were 8 mega-deals (deals surpassing $1B in value) announced in Q4 2022 representing $69B in value
  • Brookfield Corporation completed 3 mega-deals in Q4 representing $29B in deal value, including the $16B acquisition of Origin Energy Limited, an Australian-based producer and distributor of natural gas and electricity
  • Financial Services experienced a jump in mega-deal activity with Royal Bank of Canada announcing their intent to acquire HSBC Bank Canada for $16B and Stephen Smith announcing his proposed acquisition of Home Capital Group, adding to his significant Financial Services portfolio

Industry Sector Activity

  • Deal count increases were seen across most industries, with Metals and Mining (+30), Industrials (+29), and Information Technology (+16) leading the pack 
  • Real Estate experienced the largest decline in deal count (-25), followed by Utilities (-6) and Communication Services (-3) 
  • Industrials and Financial Services generated the largest aggregate deal values at $20.5B and $18.5B, with mega-deals representing 90%+ of the aggregate deal value in both industries

Breakdown by Transaction Size

  • Mid-market activity (deal value below $250M) proved resilient in Q4 relative to mega deals, which fell -43% quarter-over-quarter
  • For those transactions with disclosed values, the mid-market comprised 88% of activity and 7% of value in Q4

Canadian Domiciled versus Foreign M&A Targets

  • Acquisitions involving Canadian targets remained relatively flat in Q4 2022 with 431 deals, but were down from 577 deals in the same quarter last year
  • Canadian firms made 517 acquisitions in Q4 2022, of which 305 (59%) involved domestic targets ($109M average deal value) with the remainder representing foreign targets ($204M average deal value)  

Cross-Border Deals

  • Cross-border deals represented 45% of total activity and 58% of total value in Q4 2022
  • The ratio of outbound-to-inbound announcements climbed to 1.68 from an unusually low level last quarter; acquisitions by Canadian companies abroad continue to outpace foreign acquisitions of Canadian targets by a wide margin
  • Canada/U.S. activity continued to represent the bulk of cross-border transactions at 56% 

Deals by Provincial Domicile

  • Ontario remained the most active province by deal count (184) and represented 45% of all transaction value in Q4 2022, up from 167 deals and 33% of all transaction value 
  • Alberta (45) witnessed the largest declines in quarterly activity, followed by British Columbia (105) 
  • Aggregate domestic deal value increased significantly quarter-over-quarter (+112%), with Ontario and British Columbia representing 88% of the total

Crosbie & Company Inc.
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Tel: 416.362.7726 | Toll Free: 1-866-873-7002 | Fax: 416.362.3447
E-mail: info@crosbieco.com

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