Deal volume in the Canadian mergers and acquisitions market has shown a marked increase in 2004, breaking the continued downward spiral that had plagued the market since 2001, according to a new analysis by KPGM.

At the end of the year, the value of completed Canadian transactions rose almost 75% to US$83 billion from US$48 billion in 2003, based on data supplied by Dealogic.

According to KPMG, the increase in deal value can be attributed to six mega-deals valued in aggregate at approximately US$33 billion, which includes the US$14 billion acquisition of John Hancock Financial Services by Manulife Financial (April 2004) and the US$7 billion acquisition of Labatts-owned Interbrew SA by a Brazilian company, Companhia de Bebidas das Americas SA.

Meanwhile, the number of Canadian M&A deals that closed in 2004 dipped slightly to 1,051 deals compared to 1,110 in 2003.

“Even if we take away the sizeable effect of the mega-deals, Canadian deal volumes have reached a sustainable level and we’re now primed for an upturn in 2005. Right now, it’s encouraging to see our charts recording increases in deal value and stabilized deal volumes for the first time in four years”, said Peter Hatges, a Toronto-based corporate finance partner in KPMG’s advisory practice.

On the whole, worldwide M&A deal values exhibited a similar upward pattern, KPMG says. The value of global completed transactions for 2004 to date was US$1,536 billion — a 47% increase on the US$1,047 billion recorded over the comparable period in 2003. In 2004 to date, the number of globally completed deals was 18,481 — a 10% increase on 16,808 completions during the same period last year. Much of the upturn can be attributed to a string of large, high-value deal announcements most of which closed during the second half of the year.

The KPMG survey suggests that a sizable global deal pipeline is already in place for 2005. Worldwide, the survey identified 4,433 deals with a combined value of US$479 billion that have been announced but have not yet been completed. Hatges concluded: “The statistics give us some very positive signs for Canadian deals going into the New Year. Whether the trend continues will largely depend on market, geo-political and economic factors.”