The number of M&A deals in Canada was essentially unchanged in the third quarter, but the value of those deals jumped by about 40%, Crosbie & Co. reported Wednesday.

The firm says that the value of Canadian M&A transactions rose to $48 billion in the third quarter from $34 billion in the second quarter of 2010. However, the number of deals was more or less flat, with 268 announced transactions (compared to 265 announcements in the previous quarter).

Nevertheless, the third quarter was the strongest in three years, in terms of M&A value, Crosbie says, due to the presence of so-called mega-deals (transactions worth more than $1 billion), cross-border deals, and activity by financial sponsors.

“The level of deal activity over the last few quarters confirms buyers and sellers have an increased comfort level in pursuing M&A transactions,” says Ed Giacomelli, managing director at Crosbie. “In most sectors, the M&A environment is healthy; valuation gaps have narrowed, financing is generally available, and the economy is holding up.”

Crosbie says that there were 10 mega-deals in the quarter, valued at $32 billion, making up the bulk of the period’s activity (excluding BHP Billiton’s $40 billion bid for Potash Corp., which was subsequently blocked by the federal government). This is up from seven mega-deals, worth $12.3 billion, in the previous quarter.

Given the failure of the Potash deal, the largest announced deal in the quarter was a domestic transaction, Kinross Gold Corp.’s $6.9 billion bid for Red Back Mining Inc. “Despite the industry minister’s decision to block the Potash take-over bid, Canadian businesses remain on the radar for global players,” says Giacomelli.

Indeed, Crosbie reports that eight of the top 10 deals were cross-border deals, representing almost 60% of announced deal value. And, Canadian led deals continued to outpace foreign led deals by over two to one, it said.

Financial sponsors were highly active in deals above $100 million, Crosbie says, with 15 announced transactions valued at $17.6 billion in the third quarter; which it says represents the highest level of quarterly activity in over three years.

IE