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September 30, 2015 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q3 2015


The Canadian M&A market (which we define as all M&A deals involving a Canadian company as a material counterparty) rebounded strongly after four consecutive quarters of declining activity. Figures developed by Crosbie & Company using Capital IQ and other sources indicated 673 announcements in Q3, up 3% from the previous quarter and down 12% from the recent peak in activity in Q2 2014.

Due to increased mega deal activity (transactions in excess of $1B in value) and nearly $60B in foreign acquisitions by Canadian companies, the value of announced transactions jumped 23% from the second quarter to $92B in the third quarter, the highest level observed in recent years.

The year over year decline in activity was largely the result of weakness in the Energy sector and partially offset by renewed strength in Information Technology and Mining. From a dealsize 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 year over year, with 433 transactions involving Canadian targets (including both those with domestic or foreign buyers) in Q3, down from 482 in Q3 2014. However, domestic activity was in line with the 435 transactions recorded in Q2 2015. 


There were 16 mega-deals (transactions in excess of $1B in value) announced in Q3, representing an aggregate value of $70.7B. Mega deals accounted for over 76% of the total value of M&A activity for the quarter. 

The largest transaction of the quarter saw Emera expand its US footprint with the acquisition of TECO Energy, a regulated electric and gas utility in Florida and New Mexico for $13.8B. 

The second largest transaction of the quarter involved Brookfield Infrastructure Partners LP continuing its buying spree ‘down under’ with the purchase of Asciano, an Australian rail and port logistics company for $12.5B. 

Financial Sponsors 

Financials sponsors remained active in the third quarter of 2015 on both the buy-side and sell-side with 26 transactions (in excess of $100M), valued in aggregate at $53B. Six of the ten largest transactions in the quarter involved a financial sponsor, including CPPIB and PSP’s acquisition (as part of a consortium led by MBK Partners) of Homeplus Co., a multi-channel retailer in Korea, for $8.6B. In addition, pension funds continue to invest in stable, long-life infrastructure assets. Borealis Infrastructure, as part of a consortium, acquired Tank and Rast, Germany’s largest owner and concessionaire of a network of motorway service areas, for $5.6B.

Industry Sector Activity

The Real Estate sector returned to being the most active sector, with 107 transactions worth $15.4B. The largest transaction in the sector saw Cascade Investment, SSgA Funds and the Woodbridge Company selling their stakes in Strategic Hotels & Resorts to Blackstone Group for $7.8B. 

The most active sector by deal value was Industrials with 85 deals valued at $19.8B, largely due to the Asciano transaction mentioned above. Another notable transaction in the sector is the sale of Shred-it International, a Birch Hill portfolio company, to NASDAQ listed Stericyle for $4.2B. Magna International expanded its power train business with the acquisition of Getrag, one of the world's largest suppliers of automotive transmissions, for $3.5B. 

Activity was also strong in the Information Technology sector with 91 transactions valued at $3.4B. The largest IT transaction in the quarter was the $1.2B acquisition of eBay Enterprise by a consortium including Longview Asset Management. OMERS and Onex divested Sitel Worldwide, a call center and BPO service business, for $1.1B to Groupe Acticall of France. 

​The Metals & Mining sector demonstrated renewed strength amid weak commodity prices with 83 transactions, up from 59 transactions during the same quarter last year. However, many of these deals were quite small as total deal value in the sector was only $1.7B.

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 86% of all the transactions with disclosed values. This is consistent with past trends in activity. In aggregate, the mid-market transactions were valued at $7.6B or approximately 8% of total M&A value. In the third quarter of 2015, transaction size was not disclosed for 57% of transactions, up from 51% 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 mid-market as we define it here. 

Target by Province 

As shown in Figure 5, domestic M&A activity varies considerably by province. In Q3 2015, the provinces with the most announcements (in declining order of activity) were Ontario, B.C., Quebec and Alberta. These four provinces represent 81% of activity in the quarter.  

The decline in domestic activity year over year (433 announcements in Q3 2015 vs. 482 in Q3 2014), was attributable primarily to declines in activity in Alberta and Quebec. In Alberta, depressed M&A activity in the oil patch resulted in a 41% decline in total transactions (54 versus 92 in Q3 2014), while Quebec declined 23% to 58 transactions.

Cross-Border Deals 

As the data in Figure 6 indicates, cross-border transactions continued to account for a significant proportion of activity with 45% 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 7 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. Inbound activity increased as foreign firms acquired more Canadian companies in Q3 compared to the same quarter last year (118 vs 93 in Q3 2014).​

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