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June 30, 2015 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q2 2015


The Canadian M&A market experienced its fourth consecutive quarter of declining activity. Figures developed by Crosbie & Company using Capital IQ and other sources indicated 652 announcements in Q1, down slightly from the previous quarter and down 15% from the recent peak in activity in Q2 2014.

However, due to increased mega deal activity (transactions in excess of $1B in value), the value of announced transactions jumped 68% from the first quarter to $75B in the second quarter, the second highest level observed in recent years. 

The year over year decline in activity was relatively broad-based, occurring across ten 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

Figure 2 illustrates that Canadian domestic M&A activity, declined significantly in Q2. There were 435 transactions involving Canadian targets (including both those with domestic or foreign buyers) in Q2, down 14% from the 508 transactions in the same quarter last year.


There were 14 mega-deal transactions in Q2, representing an aggregate value of $54.7B. 

The two largest transactions of the quarter both involved General Electric, as it executed its strategy of focussing on its industrial verticals and reducing exposure to the financing business. GE sold its private equity lending arm, Antares Capital, to CPPIB Credit Investments Inc. for $14.8B. 

GE also divested its fleet management operations in the U.S., Mexico, Australia and New Zealand to Element Financial Corporation for $8.6B.

Financial Sponsors

Financials sponsors remained active in the second quarter of 2015 on both the buy-side and sell-side with 17 transactions (in excess of $100M), valued in aggregate at $17B. Five of the ten largest transactions involved a financial sponsor, including CPPIB’s acquisition of Informatica Corporation for $6.7B. OMERS and AIMCO teamed up to acquire Environmental Resources Management Limited, a UK environmental consulting services company, for $2.1B. 

Industry Sector Activity

The most active sector by number of announced transactions was Industrials with 95 deals valued at $14.8B, a 12% increase in activity from Q2 2014. The sector’s largest transaction involved Magna International divesting its interiors operation to Spanish auto parts manufacturer Grupo Antolin-Irausa for $525M. 

After eleven straight quarters as the most active sector, transactions from the Real Estate sector declined 20% from the Q2 2014 to 91 transactions worth $14.6B. The largest transaction in the sector saw Hudson’s Bay Company and Simon Property Group acquiring 40 real estate properties in Germany for $3.3B. Also notable was Brookfield Property Group’s $3.1B acquisition of US residential real estate investment trust, Associated Estates Realty Corporation. 

Financial Services was the most active sector by deal value with over $16B in announced transactions. Significant transactions included the previously mentioned GE Antares Capital acquisitions and OMERS purchase of 30% of Brit PLC, a UK-based specialty Lloyd’s insurer, for $640M and the acquisition of Bentall Kennedy by Sun Life Investment Management for $560M.

Despite a 45% year over year decline in activity (53 transactions in Q2 2015 vs. 97 transactions in Q2 2014), the Energy sector was still active in terms of deal value with $11.3B worth of transactions, including four mega-deals. Slumping oil prices provided opportunity for strategic and financial groups alike with strong balance sheets to acquire assets at a discount, such as Crescent Point Energy Corp’s purchase of Legacy Oil and Gas for $1.5B. However, other players were looking to raise capital through the sale of non-core assets, including Cenovus divesting its interest in Heritage Royalty to Ontario Teachers’ Pension Plan for $3.3B and Apache selling Quadrant Energy to Brookfield Asset Management and Macquarie Capital Group Limited acquired for $2.6B. 

Activity in the Information Technology sector was also strong with 91 transactions valued at $6.9B. The largest IT transaction was the aforementioned Informatica Corporation transaction.

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 87% of all the transactions with disclosed values. This is consistent with past trends in activity. In aggregate, the mid-market transactions were valued at $8B or approximately 10% of total M&A value. In the second quarter of 2015, transaction size was not disclosed for 52% of transactions, up from 46% 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 Q2 2015, the provinces with the most announcements (in declining order of activity) were Ontario, B.C., Alberta and Quebec. These four provinces represent 86% of activity in the quarter.

The significant decline in domestic activity year over year (435 announcements in Q2 2015 vs. 508 in Q2 2014), was attributable primarily to declines in activity in Alberta, Quebec, and to a lesser extent, Ontario. In Alberta, depressed M&A activity in the oil patch resulted in a 29% decline in total transactions (75 versus 105 in Q2 2014), while Quebec declined 32% to 43 transactions and Ontario fell 10% to 150 transactions

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 1.6 times. Additionally, the value of outbound transactions exceeded the value of inbound transactions in Q2 by nearly 15 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.

Crosbie & Company Inc.
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