Canadian merger and acquisition (M&A) activity rebounded in the second quarter, following a weak first quarter performance, according to investment bank, Crosbie & Co., which tracks deal activity.
The firm reports that there were 234 transactions announced in the second quarter, generating total deal value of $44.7 billion. This represents a 9.4% increase in the number of deals, and a 52% increase in total value, Crosbie says.
“While the increase in announcements was not overwhelming, it represents a break from a declining multi-quarter trend and a return to a more normal range of quarterly activity,” it says.
“The improvement this quarter is encouraging but not entirely surprising,” adds Colin Walker, managing director at Crosbie. “Business conditions continue to remain relatively favourable for M&A in most industry sectors and could support much higher levels of activity.”
Crosbie notes that deals worth over $1 billion “surged in the quarter” with 11 transactions of this size, collectively valued at $27.9 billion. “This represents a return to more normal quarterly levels following a weak Q1 for mega-deals,” it says.
It reports that the real estate sector was the most active sector in Q2, recording 72 deals worth $7.8 billion, which represents 31% of total quarterly activity. Consumable fuels was the second most active sector in the quarter, with 40 transactions, representing over $2.8 billion in value.
Despite the fact that real estate led the way, activity in the sector was actually down from the previous quarter. Walker says the deal activity picked up in the industrial products, consumable fuels, and financial services sectors. “However, mining was very weak and real estate also showed some quarter-over-quarter weakness, likely reflecting the shift in interest rates that began in May,” he notes.
About 38.5% of the deal activity involved a cross-border component, Crosbie reports. The investment bank adds that the ratio of Canadian acquisitions of foreign firms to foreign takeovers of Canadian firms hit a record level of 3.3:1.
In terms of deal participants, financial sponsors remind active, the firm says, with 11 announced transactions of over $100 million, valued at a total of $9.3 billion. This is up from the last quarter, when financial sponsors were involved in 10 transactions totalling $8.1 billion. And, it notes that pension funds were active in the quarter, participating in a total of five transactions valued at $3.6 billion.