Canadian merger and acquisition activity market maintained its momentum from last year into the first quarter of 2005, according to data released today by Crosbie & Company Inc., a Toronto-based investment bank.

Crosbie says that, “a combination of active financial groups, strength in resource-based sectors and continued cross-border activity, contributed to the favourable M&A environment in the quarter.”

Both the number of announced transactions and the deal value remained held up relatively well. There were 200 deals announced in the first quarter, compared to 203 during the same period last year, and 210 in the fourth quarter of 2004. The total value of announced transactions was $24.0 billion during the first three months of 2005, compared to $23.5 billion in the first quarter of 2004 and $32.1 billion in last quarter of 2004.

“While the total dollar value was down relative to the last few quarters, we are continuing to see a very positive M&A environment with strategic buyers, private equity groups and pension funds all actively participating in the market,” commented Ian Macdonell, managing director at Crosbie.

It notes that financial players such as private equity groups and pension funds are playing an increasing role in the M&A market. These groups accounted for 20% of the overall M&A activity by transaction value in the quarter versus 15% for all of 2004. Firms such as Bain Capital LLC, Onex Corp., Macquarie Bank Ltd. and the Caisse de Depot et Placement du Quebec were all active during the quarter.

So-called “mega-deals” (transaction value over $1 billion) remained a strong component of the M&A market in the first quarter, with six mega-deals for a total value of $13.7 billion, Crosbie reports. This compares with four mega-deals totalling $8 billion during the same period last year and six mega-deals for a total of $12.5 billion in the fourth quarter of 2004.

The segment of the market between $100 million and $1 billion transaction value was down in the first quarter with 23 transactions worth a total $6.0 billion versus 39 transactions for a total of $13.0 billion in the first quarter of 2004 and 42 transactions for a total of $13.2 billion in the last quarter of 2004.

On a sector basis, Industrial Products was the most active sector with 44 transactions valued at $4.2 billion.

Real Estate and Oil & Gas were also extremely active with 27 and 25 transactions, respectively, as the REITs (real estate investment trusts) and royalty and income trusts continue to accelerate their growth through acquisitions, it explains.

Cross-border transactions continued to be a significant driver of the overall M&A activity, Crosbie added, representing 74% of total deal value and 43% of total deal volume.