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March 31, 2015 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q1 2015


M&A involving Canadian Companies experienced its third consecutive quarter of overall declining activity. Figures developed by Crosbie & Company using Capital IQ and other sources indicated 656 announcements in Q1, down 7% from the previous quarter and down 15% from the recent peak in activity in Q2 2014.  

The value of announced transactions was $45B in the first quarter, down 46% from the previous quarter and the lowest total since the first quarter last year.  

The decrease in activity from Q4 2014 was relatively broad-based, occurring across eight of the fourteen industry sectors. From a deal-size perspective, most of the decline in activity can be attributed to the lower middle market (under $100M) category. 

Domestic M&A Transactions 

As shown in Figure 2, when foreign M&A is excluded, Canadian domestic M&A activity was relatively flat in Q1. There were 428 transactions involving Canadian targets (including both those with both domestic and foreign buyers) in Q1, down slightly from 455 and 436 transactions in Q4 2014 and the same quarter last year, respectively. 


There were 8 mega-deal transactions (transactions in excess of $1B in value) in Q1, representing an aggregate value of $26B. 

The largest transaction of the quarter was the sale of Fortum Distribution AB, an electricity distribution business in Sweden, to Borealis Infrastructure Trust and its partners for $8.9B. 

Additionally, Canada’s largest financial institution, Royal Bank of Canada acquired City National Corporation for $3.2B, as the bank furthers its strategy of expanding in the United States and the wealth management sector. 

Financial Sponsors 

 Financials sponsors remained active in the first quarter of 2015 on both the buyside and sell-side with 20 transactions (in excess of $100M), valued in aggregate at $21B. Five of the ten largest transactions involved a financial sponsor, including several infrastructure transactions, such as the Caisse de dépôt et placement du Québec’s acquisition of the UK high speed passenger train company Eurostar Group Limited for $1.1B. CPPIB and Hermes GPE acquired a 30% interest in Associated British Ports for $3.0B. These pension funds continue to make significant infrastructure investments as part of their strategies to match their long term liabilities with investments in long term assets that to tend generate stable inflation-protected returns.

Industry Sector Activity

Despite an 11% decline in transactions from the previous quarter, the Real Estate sector remained the most active sector for the eleventh consecutive quarter, with 104 transactions worth $6.7B. The largest transaction in the sector involved Northwest Healthcare Properties REIT acquiring Northwest International Healthcare Properties REIT for $0.8B in a related party transaction. 

The most active sector by deal value was Industrials with 80 deals valued at $11.3B, largely due to the Eurostar transaction mentioned above. 

Financial Services was the second most active sector by deal value with over $9B in announced transactions. Significant transactions included the previously mentioned Royal Bank acquisition and Fairfax Financial’s purchase of Brit PLC, a UK-based specialty Lloyd’s insurer, for $2.4B. 

Activity in the Information Technology sector was also strong with 79 transactions valued at $2.2B. The largest IT transaction saw DH Corporation acquire Fundtech for $1.6B, as it continues migrating away from its legacy cheque printing business towards being a provider of technologies for financial institutions. 

Consumer Discretionary was also active with 79 transactions valued at $2.9B. The largest transaction in the sector involved The Intertain Group expanding its online gaming business by acquiring Gamesys for $0.8B. 

Breakdown by Transaction Size 

While the aggregate transaction value for the quarter was largely driven by mega deals, the bulk of the activity is driven from transactions with deal values under $250 million. 

As shown in Figure 4, the mid-market continues to be the foundation of Canadian M&A transaction volume with deals under $250 million representing 90% of all the transactions with disclosed values. This is consistent with past trends in activity. In aggregate, the mid-market transactions were valued at $9B or approximately 20% of total M&A value. 

In the first quarter of 2015, transaction size was not disclosed for 55% of transactions, up from 49% in 2014. 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 midmarket as we define it here.

Target by Province

As shown in Figure 5, domestic M&A activity varies considerably by province. In Q1 2015, the provinces with the most announcements (in declining order of activity) were Ontario, B.C., Alberta and Quebec. These four provinces represent 88% of activity in the quarter.

However, against the backdrop of relatively flat domestic activity year over year (428 announcements in Q1 2015 vs. 436 in Q1 2014), there was significant variability in activity between the provinces. For example, Ontario was up significantly with 167 announcements in Q1 2015 or 40% of the domestic total vs. 132 announcements in Q1 2014 representing 30% of the domestic total. 

Cross-Border Deals

As the data in Figure 6 indicates, cross-border transactions continued to account for a significant proportion of activity with 42% of all transactions involving a foreign target or buyer, demonstrating the global nature of the Canadian economy.

Canadian companies making acquisitions abroad (“outbound” transactions) outnumbered the number of foreign companies acquiring in Canada (“inbound” transactions) by a factor of 1.5 times. Additionally, the value of outbound transactions exceeded the value of inbound transactions in Q1 by 9 times. In this quarter, we saw a continuation of the trend observed recently where Canadian firms were both more active abroad and spending more than foreigners acquiring Canadian companies. 

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