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February 01, 2018 | M&A Reports 

Crosbie & Company Canadian Mergers & Acquisitions Report for Q4 2017


Canadian M&A activity (which we define as all M&A deals involving a Canadian entity as a material counterparty) flourished during the fourth quarter of 2017 reaching a six year quarterly high in terms of the number of announcements.  Figures developed by Crosbie & Company using Capital IQ and other sources indicated 780 announcements in Q4, up 13% from the same quarter last year and the seventh sequential quarter where activity increased year-over-year.

The total value of announced transactions for the quarter, at $45B, was slightly below the quarterly average observed over the past six years. 

The quarter brings the annual total number of announcements for 2017 to 2,991, an 11% increase from the 2,685 announcements in 2016 and the highest number of annual announcements since 2011. However, from a deal value perspective, the aggregate transaction value for 2017 of $252B was 24% lower than the $332B announced in 2016, due to less blockbuster mega-deals (transactions in excess of $1B in value) announced in the fourth quarter and 2017 overall.

The strength in M&A activity during the quarter was mixed across the industry spectrum, with 8 of the 14 sectors experiencing an increase in activity relative to Q4 2016. The majority of the increase in activity came from the Metals and Mining, Healthcare, and Information Technology sectors, and was more than enough to offset declines in typically active sectors, Energy and Real Estate.

Domestic Versus Foreign M&A

Figure 2 indicates that the strength in activity during Q4 was supported by a robust domestic M&A market. In Q4, there were 503 transactions involving Canadian targets (including both those with domestic or foreign buyers), a 13% increase relative to the same period last year.   Similarly, activity involving foreign targets also increased 12% to 277 transactions (compared to 248 in Q4 2016).


There were 11 mega-deals announced in Q4 for an aggregate value of $26B or 52% of the total value of M&A activity for the quarter.  Mega-deal activity was down slightly in terms of number and value of announcements from the 15 mega-deals valued at $31B in Q4 of 2016. Aggregate deal value attributable to mega-deals during the quarter was generally towards the lower end of the range observed over the last five years. 

The largest announced transaction was the $6.3B acquisition of an Asian wind and solar renewable energy asset portfolio of Equis Funds Group, by a consortium of investors led by Global Infrastructure Partners III in conjunction with Public Sector Pension Investment Board, CIC Capital Corporation.
The second largest announced transaction of the quarter featured the proposed management buyout of Canadian Solar Inc., a solar power equipment manufacturer, for $4.5B.  

Financial Sponsors

Financial sponsors were active in the fourth quarter of 2017 on both the buy-side and sell-side with 14 transactions (in excess of $100M) valued in aggregate at $17B.  Five of the ten largest transactions in the quarter involved a financial sponsor, including several Canadian pension funds who continue to pursue large transactions both domestically and abroad. Pension funds accounted for the majority of financial sponsor activity during the quarter, participating in 11 of the 14 transactions in excess of $100M. 

Industry Sector Activity

Metals and Mining rounded out an active year of M&A activity with another strong quarter of 104 announced transactions valued at $933M, remaining the most active sector for the fourth straight quarter. Information Technology activity also increased significantly in Q4, with activity up 21% to 100 transactions worth $7.4B. The sector’s largest transaction was the aforementioned Canadian Solar transaction.

The Consumer Staples sector also showed a strong increase in activity during the fourth quarter with 45 announced transactions worth $4.6B (compared to 29 announcements valued at $2.9B in Q4 2016). The largest transaction in the sector featured the acquisition of Canadian natural health product producer Atrium Innovations Inc., by Nestlé Health Science S.A., for $2.9B.

Healthcare also experienced a 33% increase in activity over the same quarter last year, primarily driven by a flurry of acquisitions within the medical cannabis sector.

Noteworthy declines in activity were observed in the Real Estate and Energy sectors, where announcements decreased 15% and 10% from the same period last year, respectively. The aggregate value of announcements for these two traditionally stalwart sectors was also down significantly by 32% and 67% respectively, due to less large transactions.

The Utilities sector was the most active in terms of deal value at $9.7B bolstered by the aforementioned sale of Asian renewable energy assets by Equis Funds Group.

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 92% of all the transactions with disclosed values.  This is consistent with past trends in activity.  In aggregate, the mid-market transactions were valued at $10.6B or approximately 23% of total M&A value.  

In the fourth quarter of 2017, transaction value was not disclosed for 53% of the transactions, slightly above the 50% in Q4 2016.  While this limits the precision of inferences we can make about the size distribution of transactions, it is reasonable to assume that 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 84% of activity in the quarter.  

On a year-over-year basis, British Columbia and Quebec experienced the largest increases in activity (107 and 83 announcements in Q4 2017 vs 84 and 59 in Q4 2016, respectively). In Ontario, M&A activity increased 7% (179 versus 167 in Q4 2016), and it 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 44% of all transactions involving a foreign target or buyer.

In this quarter Canadian firms continued to be more active abroad 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 1.8 times.  However, the value of outbound transactions failed to exceed the value of inbound transactions for the first time in over three years.  

Canadian companies remained active buyers south of the border buying more US companies than US acquisitions of Canadian based companies (135 compared to 62) despite being outspent by their US counterparts ($3.4B compared to $4.3B).

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