Canadian mergers and acquisitions activity showed renewed signs of life in the third quarter with 194 deals worth $34.1 billion.

According to data compiled by Crosbie & Company Inc., the total dollar value spiked to levels not seen since mid-2001, thanks to a resurgence of mega-deals (transactions valued over $1 billion) in the quarter. In the second quarter there were 219 transactions, but they only totaled $12.8 billion in value.

The spike in value was led by Manulife Financial’s proposed $15 billion acquisition of John Hancock Financial Services Inc., and, Alcan Inc.’s proposed acquisition of Pechiney SA, valued at approximately $6.3 billion.

Ignoring the impact of these two mega-deals, the dollar value of announced transactions in the quarter was consistent with Q2, Crosbie says.

“While large transactions create excitement, we continue to see strength exhibited in the core market segment — those transactions under $500 million,” said Mel Margolese, partner at Crosbie, in a statement.

“Year-to-date activity in that category has remained at a par with last year with approximately 400 announced transactions valued at $25 billion. The combination of improved operating performance by potential strategic buyers, forecasts of good economic growth, valuation multiples generally in line with historical norms and capital pools seeking homes for their ample cash resources, augurs well for activity in that segment of the market.”

On a sector basis, financial services and industrials were the top two performers, driven by the mega-deals. The utilities, communications & media and gold sectors also showed strong growth in both the volume and value of announced transactions. The oil & gas sector continued to be modestly active, but the average deal size continued to fall — for the nine months ending September 30, there were 76 transactions in the sector totaling $6.4 billion, compared to 76 transactions totalling $18.4 billion for the same period last year.

Cross-border activity remained an important element of the Canadian M&A landscape. There were 267 cross-border transactions totalling $47.6 billion in the first nine month of 2003, compared to 315 transactions totalling $36.5 billion in the same period last year, an increase of over 30% in value.

Interestingly, the number of acquisitions of Canadian companies by U.S. companies has declined 48% this year to 34 transactions worth $4.5 billion, compared to 65 transactions totalling $6.6 billion in the same period last year.