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December 31, 2015 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q4 2015


The Canadian M&A market (which we define as all M&A deals involving a Canadian company as a material counterparty) resumed the downward trend that began in mid-2014.  Figures developed by Crosbie & Company using Capital IQ and other sources indicated 643 announcements in Q4, down 4% from the previous quarter and down 9% from the same quarter last year. This was the fifth decline in activity in the last 6 quarters.

However, as a result of increased mega deal activity (transactions in excess of $1B in value), the value of announced transactions jumped 76% from the third quarter to $137B in the fourth quarter, the highest level observed in recent years.

The year over year decline in activity has been 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

Figure 2 illustrates that Canadian domestic M&A activity declined year over year, with 435 transactions involving Canadian targets (including both those with domestic or foreign buyers) in Q4, down from 454 in Q4 2014.  However, this level of domestic activity was in line with the 435 and 433 transactions recorded in Q2 and Q3 2015, respectively.


There were 17 mega-deals (transactions in excess of $1B in value) announced in Q4, representing an aggregate value of $118.7B. Mega deals accounted for over 86% of the total value of M&A activity for the quarter, the highest proportion observed in recent years. 

The largest announced transaction of the quarter was CP Railway’s $50.3B proposal to acquire Norfolk Southern, the second-largest railroad in the eastern U.S., in an attempt to create a transcontinental carrier. However, this transaction faces significant uncertainty, including regulatory hurdles.

The second largest transaction of the quarter involved Caisse de dépôt et placement du Québec (as part of a consortium) increasing its presence in Australia with the $12.6B purchase of the 99-year lease of TransGrid, owner and operator of the electricity transmission network of the State of New South Wales.

Financial Sponsors

Financial sponsors remained active in the fourth quarter of 2015 on both the buy-side and sell-side with 26 transactions (in excess of $100M) valued in aggregate at $61B.  Eight of the ten largest transactions in the quarter involved a financial sponsor, including several infrastructure transactions such as CPPIB’s acquisition (as part of a consortium) of Australian rail and port logistics company Asciano for $10.6B, trumping a prior bid from Brookfield Infrastructure Partners LP. A consortium consisting of CPPIB, OTPP and OMERS acquired Skyway Concession, owner and concessionaire of Chicago Skyway toll road, for $3.8B. Canadian pension funds remained very active in the market for global infrastructure assets as they seek to generate stable inflation-protected returns.

Industry Sector Activity

The Real Estate sector remained the most active sector for the quarter with 101 transactions worth $21.8B despite a 13% decline in the number of deals from the same quarter last year. However, total deal value for the sector tripled compared to Q4 2014 due to a few large transactions, including Ivanhoe Cambridge and Blackstone’s $6.9B acquisition of the Stuyvesant Town-Peter Cooper Village in Manhattan.

The most active sector by deal value was Industrials with 84 deals valued at $69.3B, largely due to the CP Railway transaction mentioned above. Even after excluding the CP Railway transaction, the sector exhibited strength with an increase in both transaction activity and value when compared to the same quarter last year.

The Energy sector remained weak amid tumbling crude oil prices with 65 transactions, down from 75 transactions during the same quarter last year. Total deal value in sector fell 78% from $52.1B in Q4 2014 to $11.4B. One notable transaction in the sector involved Suncor Energy acquiring Canadian Oil Sands, the largest partner in the Syncrude oil sands operation for $6.6B.

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 $8.4B or approximately 6% of total M&A value. 

In the fourth quarter of 2015, transaction size was not disclosed for 52% of transactions, up from 48% 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 Q4 2015, the provinces with the most announcements (in declining order of activity) were Ontario, B.C., Alberta and Quebec.  These four provinces represent 85% of activity in the quarter. 

The decline in domestic activity year over year (435 announcements in Q4 2015 vs. 454 in Q4 2014), was attributable to declines in activity in Quebec and Ontario. In Quebec, M&A activity declined 26% (52 versus 70 in Q4 2014), while Ontario declined 6% to 163 transactions.

In Alberta, depressed M&A activity in the oil patch resulted in a 79% decline in total deal value ($11.1B vs $52.1B in Q4 2014).

Cross-Border Deals

As the data in Figure 6 indicates, cross-border transactions continued to account for a significant proportion of activity with 39% of all transactions involving a foreign target or buyer, demonstrating the global nature of the Canadian economy.

Despite the weakening of the Canadian dollar, 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 Q4 by a margin of $106B to $4B. 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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