Mergers, acquisition deals at strongest levels since credit crisis
Published Wednesday, August 3, 2011 1:33PM EDT
TORONTO - Unfazed by economic crises gripping much of the world, Canadian companies had their strongest season of mergers and acquisitions since the credit crisis began in 2008, according to a report by PwC.
The consulting firm said the majority of the 836 deals in the quarter worth a total of US$57 billion were in the materials, energy, and financial sectors. Those sectors accounted for 61 per cent of all deals made in the quarter.
"Capital markets are confused and the consensus is that the recovery is extremely fragile," the report said, referring to the European and U.S. debt crises and the aftermath of the tsunami and resulting nuclear disaster in Japan.
"It's bad news all around -- except for the Canadian merger and acquisition market."
PwC says that so far this year there have been 16 "mega deals" involving Canadian companies, worth US$1 billion or more each. Those mega deals made up most of the value of market.
These include the world's largest gold miner, Barrick Gold Corp.'s (TSX:ABX) pending $7.8-billion acquisition of copper miner Equinox Minerals, and a consortium made up of Research in Motion (TSX:RIM), Apple, Sony and Microsoft purchasing the patents of Nortel Networks for $4.5 billion.
But there was also a high number of smaller deals worth less than $100 million, mainly in Canada's junior mining and energy sectors, the report said.
Real estate mergers and acquisitions outpaced other sectors in the quarter, with Canadian companies inking a total of 90 deals worth nearly $10 billion, the report said.
PwC described that market as a "real estate buying frenzy," saying that deals in the real estate sector were worth $9.7 billion. Those deals involved Canadian companies buying domestic property, but also real estate in Europe and Australia. That's a shift from last quarter, which saw purchases mainly in emerging markets like Asia.
As Canadian companies enjoy relatively low interest rates, the aggregate annual value of real estate deals has increased by 1,119 per cent over the last 10 years.
Those deals last quarter included Dundee REIT's (TSX:D.UN) $1.09-billion purchase of 295 commercial properties in Germany, Primaris REIT's $584 million acquisition of five Canadian shopping malls, and the Canada Pension Plan Investment Board's $485 million purchase of an Australian shopping mall.
PwC says the number of deals should start slowing because of current market instability but adds that Canada will still do better than other developed countries.
However, it says resource-rich Western Canada will likely outpace deal markets in countries like the United States and United Kingdom, as higher commodity prices spur growth.