Canadians completing more M&A deals in the US with higher aggregate
value than vice versa
TORONTO, Nov. 24, 2011 /CNW/ - Despite economic uncertainly in the US, Canadian firms are making M&A history this year by acquiring more
companies south of the border than vice versa (ratio of 1.5 to 1). The
value of deals is also higher (ratio of 1.16:1). It's another sign that
businesses here are benefiting from a more robust economy and that they
still believe in the US market, says Kristian Knibutat, Canadian Deals
leader at PwC and one of the authors of PwC's client newsletter, the
Capital Markets Flash (www.pwc.com/ca/cmf).
As of November 14th, PwC observed Canadian entities involved in 385 US acquisitions worth
over $US22 billion, 40% of all cross border deals by value and an
all-time record-setting pace by volume. In the middle market
(US$100-$US500 million), acquisition volumes and values have been
steadily rising since 2005 and are on track to be triple what they were
only five years ago.
In addition to the relative strength of the Canadian dollar, Knibutat
says Canadian M&A buyers continue to flock to the US for a number of
A perception that the US is still a safe haven (compared to Europe and
Access to cheap deal capital that can be used to boost returns
A larger scale and broader scope of M&A opportunities
A desire to replace public market exposure with private market exposure
Although the US is declining as a proportion of cross border deal
destinations, it remains the investment destination of choice for
Canadian buyers by a long shot. The second most targeted foreign
country by Canadians this year was Australia, representing only 3.7% of
cross border volumes. "While Canadians are hedging their bets by going
further afield, they still favour the US. And they are willing to pay.
Average premiums over the price of an acquired US target's share price
one month prior to a deal announcement have been rising since the
recession," says Knibutat. This year, the average share premium hit an
astounding 51%, the highest average premium in PwC's database. (average
share premiums for Canadian targets currently sits at approximately
"Hot" US sectors identified by PwC that are likely to see some Canadian
acquisition activity include:
Energy: PwC expects to see a high level of acquisition interest in US
upstream deals as independents shift their portfolios to oil dominated
assets from natural gas assets. PwC also expects the midstream sector
will also remain active as large MLPs and private equity look to add to
their asset bases in response to the increase in demand for
infrastructure and logistics resulting from new shale area development.
Oil field services consolidation will also continue as the large
players look to strengthen their core businesses to take advantage of
increased drilling activity.
Financials: PwC expects that acquisitions of US financial services
companies are likely to gain momentum through 2011. Prospective
regulatory changes and economic pressures may continue to drive small-
and medium-sized US regional banks to seek out deal partners. And, as
the US financial sector continues to restructure, we may see further
disposals of non-core or higher risk lines of services.
Healthcare: PwC excepts that US healthcare M&A and joint venture
activity will continue to accelerate, presenting many interesting deal
opportunities for Canadians. In particular, Canadians may seek to
acquire US managed care providers and hospitals in order to penetrate
the lucrative US market. We also expect that the US medical device
industry will continue to offer up interesting deal targets as the
sector seeks to achieve cost savings and diversify product portfolios
(as a result of federal excise taxes, downward pressure on pricing and
reimbursements and declining procedure volumes in certain high cost
High technology: PwC expects that the underlying drivers of US
technology M&A will persist in the near term: innovation, sector
convergence and vendor consolidation. Each of these should present
unique opportunities for Canadian technology players to either acquire
companies in order to access captive customer bases (into which
Canadian technologies can be pushed) or acquire point solutions that
fill technology gaps in Canadian suites.
Media: Canadian media companies may seek out growth beyond Canadian
borders into the innovative US media market, which has seen a number of
firms succeed in generating sustained cash flows from both advertising
and subscription based models in an age of disruptive mobile devices.
Real Estate: Well capitalized Canadian REITS and Canadian pension funds
are likely to continue seeking out opportunistic buys in the US Real
Estate market. PwC's most recent emerging trends in real estate
publication sets out what the likely "big bets" would be through
2012. Please contact us for a copy of the US Real Estate Opportunities
Capital Markets Flash includes nine graphs and further amplification of
the topics covered in this release.The full report can be accessed at: www.pwc.com/cmf.
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About PwC's Deal Team
PwC's Deal Team (www.pwc.com/ca/deals) helps clients to achieve deal success—from concept to close and
beyond. As part of the world's largest Transaction Advisory practice1, and with our global Corporate Finance group being 2010 Upper Mid
Market M&A Advisor of the Year2, the PwC Canada Deals Team is your gateway to an exciting new world of
emerging M&A opportunities.
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1 Source: Kennedy;"Business Advisory Services Marketplace 2009-2011" ©BNA
Subsidiaries, LLC. Reproduced under license.
2 Source: Acquisitions Monthly Awards 2010
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partnership, which is a member firm of PricewaterhouseCoopers
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