Crosbie & Company Canadian Mergers & Acquisitions Press Release for Q3 2016

Mega-Deals Soar on Southbound M&A

Following a flurry of activity in Q2, Canadian M&A activity remained strong in the third quarter of 2016 on the strength of mega-deals which catapulted deal values to a 4-year high.  Figures developed by Crosbie & Company using Capital IQ and other sources indicated 681 announcements valued at $132.4B in Q3 (compared to 709 deals worth $47.9B in Q2 2016).  
    
“The number of mega deals is impressive by any measure,” said Ed Giacomelli, Managing Director at Crosbie & Company.  “We continue to enjoy a robust M&A market across the size spectrum.  Access to capital, attractive valuations, and the number of business owners looking for exits continue to set attractive conditions for M&A.”

There were 16 mega-deals announced in the quarter with a total value of $115.4B compared to 10 deals valued at $26.7B last quarter.  The largest announced transaction was Enbridge’s $61B offer to acquire Spectra Energy, a Texas-based natural gas and crude oil pipeline company.  The deal provides Enbridge with increased scale, asset diversity, and a portfolio of operating and development projects.  The transaction marks the largest foreign takeover by a Canadian company and creates the largest energy infrastructure company in North America.  Another significant transaction in the quarter featured the announced merger of equals between agra-product heavyweights Agrium and Potash Corporation, in a transaction valued at $24B.  These two transactions alone contributed approximately 65% of the total deal value for the quarter.

There were 461 domestic transactions (where the target is located in Canada) valued at $46.7B in the quarter (compared to 483 deals worth $19.8B in Q2 2016).  Cross-border transactions in the quarter represented 41% of all announcements, in line with the long-term trend.  However, Canadians were involved in 173 foreign deals worth $77.7B (compared to 185 deals worth $21.7B in Q2 2016) as outbound M&A continued to outpace inbound M&A by a ratio of 1.7:1.  In addition to the Enbridge deal, Open Text’s $2.1B acquisition of Dell’s Enterprise Content Division is indicative of Canadian corporations seeking to make strategic acquisitions abroad.

“The strength in outbound M&A shines a light on the strategic importance to Canadian corporations of growth by acquisition, specifically in the United States,” added said Mr. Giacomelli.

Energy and Materials jumped to become the largest sectors by deal value, as mega deals within the sectors drove the aggregate transaction values for the quarter to $71B and $25B, respectively.  Metals and Mining remained the most active sector by deal volume in Q3, notwithstanding the decline from 113 transactions in Q2 to 94 transactions in the current quarter.  Financial Services saw a strong uptick in activity with 44 transactions, up 57% from 28 deals in the prior quarter.  Industrials also experienced a significant rise in activity, increasing 31% to 92 deals compared to 70 transactions last quarter. After activity surged 53% in Q2, Real Estate experienced a reversion to the mean in Q3 with 90 transactions, down 20% from 112 transactions in the quarter prior.  

Financial sponsors were active in the quarter with 10 transactions (in excess of $100M), down from 13 in Q2 2016 and consistent with the recent trend.

The mid-market continued to be the foundation of M&A activity with 302 reported transactions under $250M valued at $7.3B, representing 91% of all transactions with reported values.  Mid-market activity in Q3 decreased 5% from the 319 transactions noted in Q2 2016.