A forecast pick-up in merger and acquisition activity by Canadian companies would boost the fortunes of leading M&A advisory firms, says consulting firm Greenwich Associates.

Greenwich says that Canadian companies “appear to be preparing to take advantage of big cash positions and favorable credit conditions” by pursuing both domestic and international M&A deals. Canadian companies were already reasonably strong financially, starting 2010 with some of the largest cash positions on record, and during the past year companies have had easy access to long-term capital, Greenwich says, “through bond issues sold at historically low interest rates”; and, it reports, new research “shows that banks are eager to provide them with ample amounts of credit at favorable terms”.

Greenwich says its latest investment banking study shows that “the willingness of major Canadian banks to extend credit at attractive terms has served as a powerful supplement to the booming corporate bond market over the past year.” It reports that approximately 70% of Canadian companies interviewed at the start of 2010 said it is “not at all difficult” to access bank credit; only 15% report levels of difficulty in obtaining credit from their banks.

“The improvement in corporate access to bank financing has been dramatic over the past 12 months,” says Greenwich Associates consultant, Jay Bennett. “In 2009, only approximately 30% of large Canadian companies stated that they had no difficulties at all in obtaining bank credit.”

At the same time, Canadian companies have been tapping the corporate bond market to capitalize on low interest rates and strong investor demand, Greenwich says. It adds that that almost 60% of investment-grade companies, and nearly a third of companies overall, expect to raise capital through a corporate bond issue in 2010-2011.

All of this is pointing to increased M&A activity, Greenwich suggests. It reports that from 2008 to 2009, 28% of Canadian companies were active in domestic M&A transactions. That increased to 31% in 2009-2010. Looking ahead to 2010-2011, 42% of large Canadian companies expect to be active in domestic M&A, it says. Also, 20% of Canadian companies were active in international M&A from 2009-2010; that share is expected to increase to more than a quarter in 2011, it adds.

“The primary beneficiaries of a pick-up in M&A activity among Canadian companies will be the country’s leading M&A advisors,” Greenwich notes. RBC Capital Markets is the market share leader in that area, it says, named as an important M&A advisory relationship by 53% of large Canadian companies. CIBC World Markets Inc. ranks second at 50%, followed by BMO Capital Markets and Scotia Capital at 48%, and TD Securities at 41%.

Additionally, it reports that RBC is also the leader among Canadian debt capital markets advisors, named as an important DCM relationship by 60% of large Canadian companies. Scotia Capital is next at 42%, CIBC is at 41%, BMO Capital Markets has 39%, and TD Securities scores 38%.

IE