The third quarter of 2005 was the hottest period for the Canadian M&A market since the technology boom of 2000, according to data released today by Crosbie & Co. Inc., a Toronto-based specialty investment bank.

Crosbie said that, “a resilient North American economy, record high energy prices, strong activity in the income trust sector, and continued cross-border activity, contributed to the favourable M&A environment in the quarter.”

It reports that the number of announced transactions increased to 304 in the quarter compared to 207 during the same period last year and 309 in the second quarter of 2005. The total value of announced transactions during the third quarter was $49.9 billion, compared to $29.4 billion during the third quarter of 2004 and $29.8 billion in the second quarter of 2005.

“The M&A market is firing on all cylinders,” said Ed Giacomelli, managing director at Crosbie. “It should remain robust well into 2006.”

The oil & gas sector represented 25% of the deal volume in the quarter and 33% of the total transaction value, including three of the 10 largest transactions in the quarter. “Demand for oil reserves is driving activity in the sector and continues to draw the attention of domestic and international acquirers alike, including China,” said Giacomelli.

Mega-deals (transactions valued over $1 billion) in the third quarter exceeded the total activity in the first with six months of 2005, with 12 deals and a total value of $33.9 billion, up from the nine mega-deals totalling $15.6 billion during the same period last year.

The segment of the market below $100 million in transaction value also remained robust with 193 transactions, up significantly from the 117 during the same period last year and the 187 in the previous quarter.

Cross-border transactions also continued to be a significant driver of the overall M&A activity, representing 73% of total deal value and 36% of total deal volume. Crosbie reported that there were 296 cross border transactions totalling $74.8 billion in the first nine months of 2005 compared to 252 transactions worth $52.1 billion for the same period last year.

The trend of Canadian companies acquiring U.S. companies continued – there were 126 such acquisitions compared to only 30 acquisitions of Canadian businesses by U.S. companies. “While fewer in number, foreigners have stepped up their acquisition of strategic Canadian businesses,” noted Giacomelli.

Income trusts, including REITs, energy trusts and other business trusts, accounted for 82 deals valued at $8.9 billion in the third quarter, up from 28 deals valued at $4.0 billion during the same quarter last year. This represents 27% of the deal volume in the quarter and 18% of the total transaction value.

Other sectors that were busy include industrial products, which saw 57 transactions in the quarter, the second most active sector by deal volume, an increase from 55 last quarter and 53 in the same quarter last year. Total deal value also increased to $3.2 billion, up from $1.4 billion in the last quarter and $1.3 billion in the third quarter of 2004.

Also, financial services experienced a surge of activity with total deal value reaching $6.8 billion, lead by the TD Bank which continued its US expansion with the acquisition of Hudson United Bancorp, and Sears Canada Inc.’s sale of its credit card portfolio to J.P. Morgan Chase & Co. for $2.2 billion.

The real estate sector was also extremely active with 48 transactions valued at $1.4 billion. REITs led the activity, participating in 31 deals.

The largest deal of the quarter occurred in the utilities sector as Kinder Morgan Inc. acquired Terasen Inc. for $6.9 billion.