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November 23, 2016 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q3 2016


Canadian M&A activity (which we define as all M&A deals involving a Canadian company as a material counterparty) was tracked at 681 transactions in Q3 of 2016.  Based on figures developed by Crosbie & Company using Capital IQ and other sources, activity in Q3 was roughly in line with the same quarter last year although 4% below the 2 year high water mark in Q2 2016.  Deal value, on the back of a number of record mega-deals, surged to $132B, up 65% from $80B in Q3 2015.

Activity in the third quarter reflects a strong year over year recovery in the resource sectors (Metals & Mining, Precious Metals, and Energy).  This activity was offset however, against declines in historically active sectors, including Information Technology and Real Estate.  From a deal-size perspective, most of the year over year increase in activity can be attributed to the middle market (under $250M) category, offset against a comparable decline in deals where the transactions value was undisclosed.

Domestic M&A Transactions

Figure 2 illustrates the increase in Canadian domestic M&A activity during Q3.  There were 461 transactions involving Canadian targets (including both those with domestic or foreign buyers) in Q3, up 7% from 433 transactions in the same quarter last year.


There were 16 mega-deals announced in Q3, representing an aggregate value of $115B, a four year high water mark and up 95% from the $58B in Q3 2015.

The largest transaction of the quarter was Enbridge’s announced acquisition of Spectra Energy, a Texas-based pipeline and midstream oil and gas company, for $61B., creating the largest energy infrastructure company in North America.  The transaction marks the largest acquisition of a foreign company by a Canadian company to date.

The second largest transaction of the quarter saw the announced merger of equals between two Canadian agra-product giants, Agrium and Potash Corporation, in a transaction valued at $24B.

Financial Sponsors

Financial sponsors remained active in the third quarter of 2016 on both the buy-side and sell-side with 10 transactions (in excess of $100M) valued in aggregate at $13.8B.  Three of the ten largest transactions in the quarter involved a financial sponsor, the largest of which featured Onex Corporation’s acquisition of Thomson Reuters’ Intellectual Property & Science business for $4.7B.
Industry Sector Activity

Metals and Mining was the most active sector with 94 deals valued at $1.5B, an increase of 13% over the level of activity in Q3 2015.  The largest transaction within the sector was the acquisition of Essar Steel Algoma Inc. by Ontario Steel Investment Limited for $1.2B.  Precious Metals also experienced another active quarter, increasing 95% to 72 deals with an aggregate transaction value of $1.3B (compared to 37 transactions with an aggregate value of $1.4B in Q3 2015).

Industrials was the second most active sector with 92 deals valued at $2.2B in aggregate.

Real Estate remained active with 90 deals valued at $8.5B, despite a 16% decrease in activity from 107 deals in Q3 2015.  The largest deal in the sector involved Caisse de depot et placement du Quebec’s $2.6B acquisition of France-based real estate management company Foncia Groupe SAS.

Energy saw an uptick in activity with 61 deals, up 39% from 44 deals in the same quarter last year.  

Experiencing notable declines in activity were the Information Technology and Consumer Discretionary sectors, which decreased 27% and 17% from the same period last year, respectively.

Breakdown by Transaction Size

While the aggregate transaction value for the quarter was largely driven by mega-deals (87% at announced transaction values), 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 account for the lion’s share of Canadian M&A transaction volume with deals under $250 million representing 91% of all the transactions with disclosed values.  This is consistent with past trends in activity.  In aggregate, the mid-market transactions were valued at $7.3B or approximately 5% of total M&A value.  

In the third quarter of 2016, transaction size was not disclosed for 51% of the transactions, consistent with 57% in 2015.  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 middle market as we define it here.

Target by Province

As shown in Figure 5, domestic M&A activity varies considerably by province.  In Q3 2016, the provinces with the most announcements (in declining order of activity) were Ontario, British Columbia, Quebec and Alberta.  These four provinces represent 84% of activity in the quarter.  

The increase in domestic activity year over year (461 announcements in Q3 2016 vs 433 in Q3 2015), was partially attributable to a 19% increase in activity in Ontario, (174 versus 146 in Q3 2015).

The most active province by number of targets was Ontario with 174 transactions and an aggregate value of $6.9B, consistent with recent M&A activity trends.  The largest transaction with an Ontario target was the acquisition of Trader Corporation by Thoma Bravo, LLC for $1.6B.

Cross-Border Deals

As the data in Figure 6 indicates, cross-border transactions continued to account for a significant proportion of activity with 41% of all transactions involving a foreign target or buyer, demonstrating the global nature of the Canadian M&A activity.

Canadian companies making acquisitions abroad (“outbound” transactions) outnumbered the number of foreign companies acquiring in Canada (“inbound” transactions) by a factor of 1.7 times.  Additionally, the value of outbound transactions exceeded the value of inbound transactions in Q3 by over twelve times, primarily due to the aforementioned Enbridge/Spectra Energy transaction.  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 (even after excluding the Enbridge transaction).  Inbound activity decreased as foreign firms acquired less Canadian companies in Q3 compared to the same quarter last year (104 vs 118 in Q3 2015).  Similarly, the value of inbound transactions declined 28% compared to same quarter last year ($6.4B vs $8.9B in Q3 2015).

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