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November 02, 2017 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q3 2017


Canadian M&A activity (which we define as all M&A deals involving a Canadian company as a material counterparty) was strong in the third quarter of 2017, remaining toward the top end of the recently observed quarterly announcements range.  Figures developed by Crosbie & Company using Capital IQ and other sources indicated 716 announcements in Q3. Notwithstanding the decline from the previous quarter, activity was up 5% from the same quarter last year and represents the sixth sequential quarter where activity increased year-over-year.

The quarter brings the year-to-date number of announcements to 2,211, an 11% increase from the 1,992 announcements in the first 3 quarters of 2016. 

The total value of announced transactions for the quarter remained generally in line with recent quarters at $63B, but well below the $132B in Q3 2016 where contribution from a number of large mega-deals (transactions in excess of $1B in value) bolstered transaction value to an abnormally high level.

The strength in M&A activity during the quarter was mixed across the industry spectrum, with 7 of the 14 sectors experiencing an increase in activity relative to Q3 2016. While the majority of the increase in activity came from the Metals and Mining and Precious Metals sectors, the increase was offset in part by declines in typically active sectors, Industrials, Energy and Real Estate.   

Domestic Versus Foreign M&A

Figure 2 indicates a continued shift in Canadian M&A activity from domestic targets to foreign targets. In Q3, there were 460 transactions involving Canadian targets (including both those with domestic or foreign buyers), in line with the same quarter last year.  Conversely, there were 256 transactions involving foreign targets, representing an increase of 16% relative to the same quarter last year.


There were 9 mega-deals announced in Q3 for an aggregate value of $41B or 65% of the total value of M&A activity for the quarter.  Mega-deal activity was down significantly both in terms of number and value of announcements from the 16 mega-deals valued at $115B in Q3 of 2016. However, aggregate deal value attributable to mega-deals during the quarter was generally consistent with the level observed over the last five years. 

The largest announced transaction was the $22B acquisition of America’s largest generator of electricity from natural gas and geothermal resources, Calpine Corporation, by Energy Capital Partners and a consortium of investors led by Canada Pension Plan Investment Board and Access Industries.

The second largest transaction of the quarter featured Hydro One Limited acquiring Avista Corporation for $6.7B in a transaction that expands Hydro One into complementary and diversified regulated assets in the US Pacific Northwest, including natural gas distribution. 

Financial Sponsors

Financial sponsors were less active in the third quarter of 2017 on both the buy-side and sell-side with ten transactions (in excess of $100M) valued in aggregate at $27B.  Three of the ten largest transactions in the quarter involved a financial sponsor, including pension funds and private equity groups. In particular, recently active pension funds were unusually quiet during the quarter, participating in only three transactions in excess of $100M. 

In addition to participating the in the aforementioned Calpine Corporation transaction, CPPIB also announced that it would sell its 50% ownership interest in an Ottawa office property in a transaction valued at $480M. The other large transaction featuring a pension fund was Partners Group acquiring UK-based software and services provider, Civica Group Limited, from OMERS Private Equity for $1.7B. 

Industry Sector Activity

Metals and Mining was the most active sector by number of announced transactions during the quarter with 126 deals valued at $107M, increasing 34% over the same quarter last year but comprised mainly of smaller transactions.  Similarly, Precious Metals activity also increased significantly in Q3, with activity up 21% to 87 transactions worth $1.5B. The sector’s largest transaction involved Alamos Gold Inc.’s acquisition of Richmont Mines Inc. for $935M.

The Consumer Staples sector also showed a strong increase in activity during the third quarter with 28 announced transactions worth $6.8B (compared to 12 announcements valued at $89M in Q3 2016). The largest transaction in the sector featured Metro Inc. acquiring Quebec pharmacy retailing company, Jean Coutu Group, for $4.5B in a transaction that substantially increases the Company’s Quebec presence.

Information Technology and Utilities also experienced increases in activity during the quarter, increasing 12% and 80% (from 10 to 18) over the same quarter last year, respectively.

Noteworthy declines in activity were observed in the Industrials and Energy sectors, where announcements decreased 30% and 28% 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, the bulk of the activity came   from transactions with deal values under $250 million.

As shown in Figure 4, the middle market continues to represent the majority of Canadian M&A transaction volume with deals under $250 million representing 89% of all the transactions with disclosed values.  This is consistent with past trends in activity.  In aggregate, the mid-market transactions were valued at $8.5B or approximately 13% of total M&A value.  

In the third quarter of 2017, transaction value was not disclosed for 56% of the transactions, slightly above the 51% in Q3 2016.  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

In terms of activity by province, Ontario, British Columbia, Quebec and Alberta continue to lead the way, accounting for 83% of activity in the quarter.  

On a year-over-year basis, British Columbia and Quebec experienced the largest increases in activity (101 and 82 announcements in Q3 2017 vs 83 and 72 in Q3 2016, respectively). In Ontario, M&A activity decreased 19% (141 versus 174 in Q3 2016), but Ontario remained the most active province for the quarter.

Cross-Border Deals

As the data in Figure 6 indicates, cross-border transactions continued to account for a significant proportion of activity with 46% of all transactions involving a foreign target or buyer.

In this quarter Canadian firms continued to be more active abroad and spending more than foreigners acquiring Canadian companies.  This is a trend that has been observed since 2011 and has held true regardless of exchange rate fluctuations. Canadian companies making acquisitions abroad (“outbound” transactions) outnumbered 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 almost ten times.  

Canadian companies remained active buyers south of the border, buying more US companies (123) for a higher value ($35B) than US acquisitions of Canadian companies (58 deals for $2.3B).

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