TORONTO, April 15 /CNW/ - The past 90 days in Canada have resulted in
over $50 billion worth of deal announcements - 81% higher than the
first quarter of 2010 and in line with the Q1 2007 high.
PwC's Canadian Deals Leader Kristian Knibutat says: "It has been a very
active quarter and we've seen more diversity in deal making. For the
first time since the credit crisis, the top twenty deals of the quarter
showcased a variety of different industries. But our view is that the
overall M&A environment in 2011 is dramatically different than 2007."
The PwC report suggests that 2011 will be very promising, but also
points out some key differentiators between today's post-crisis
Canadian M&A market and the pre-crisis "boom." Four trends are
A new kind of resource market. While Q1 saw activity from a variety of industries, Canada's deal
markets remains the most concentrated on the globe (49% commodities).
Within commodities, however emerging sub-sectors such as agriculture,
alternative energy, junior mining, shale gas and unconventional
extraction look to be the most promising deal opportunities. Knibutat
also stressed that "Sector concentration in energy and resources is
also a reminder that Canada's deal market is being supported by acute
concerns about a variety of macro issues. This market is not being
driven by 2007-like market exuberance."
The return of leverage (but not leveraged deals). There was no shortage of leverage available in the first quarter of
2011. In fact there was a record quarterly volume of new issue
leveraged loans in Q1, higher even than Q2 of 2007. However, most new
issues were in support of repricing and recapitalization, not LBOs.
Buyers remain hesitant to pursue leveraged buy outs that meet seller's
value expectations. According to Knibutat: "This tension is evident in
the relatively still-low LBO multiples. Buyers simply are not ready to
march back into 2007 10x EBITDA + multiple territory."
Private equity re-invented. In what is proving to be more of a market shift than a post-crisis
anomaly, financial buyers continue to take a back seat to corporate
buyers. This quarter, despite an uptick in available leverage and
robust capital markets, private equity firms were only involved in 20%
of Canadian deals (measured by value), down from 29% (Q4 2010) and 23%
(Q3 2010). No Canadian private equity deal breached the $1 billion
mark. In addition to digesting opportunistic deals completed in 2010,
many private equity firms spent the quarter focusing on rebalancing
private company portfolios and maximizing efficiencies within private
company portfolios. According to Knibutat: "The shift away from the
"lever-buy-sell" business model is not entirely due to lessons learned
during the credit crisis. It is partially being driven by a shift in
where the compelling buy-side deal opportunities are in today's market
- a variety of resource/commodity sectors and emerging markets. In
both cases, leverage is not the best way to boost returns."
A new player - China. China's role at the upper end of the deal market in Canada is new to
this cycle. An understanding of China's latest five-year plan, focused
almost exclusively on domestic growth, sheds some light on what is
behind this deal making: China is pursuing M&A in order to gain
technology and know-how to leverage within China. Rather than focus
on inbound investment from China, however, Canadians should consider
"China's five-year plan and its new 'emerging industry list' is a
positive from a Canadian perspective. We see key opportunities in
sectors such as clean energy, health care, consulting services, finance
and bio/nano technologies," says Knibutat. Overall, there will be some
good opportunities for Canadian businesses that are able to align their
strategies with Beijing's larger policy goals," he says.
The full report can be accessed at: www.pwc.com/ca/QuarterlyDeals
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.
PwC firms provide industry-focused assurance, tax and advisory services
to enhance value for their clients. More than 161,000 people in 154
countries in firms across the PwC network share their thinking,
experience and solutions to develop fresh perspectives and practical
advice. See www.pwc.com for more information. In Canada,
PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,300 partners and staff in
offices across the country.
"PwC" is the brand under which member firms of PricewaterhouseCoopers
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Sources: S&P LCD, Capital IQ, Eurasia Group, Globe and Mail, the
Economist, Financial Times, Bloomberg
1 Source: Kennedy;"Business Advisory Services Marketplace 2009-2011" ©BNA
Subsidiaries, LLC. Reproduced under license.
2 Source: Acquisitions Monthly Awards 2010
"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability
partnership, which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal
For further information:
David Rowney, PwC
Tel: 416 365 8858
Kiran Chauhan, PwC
Tel: 416 947 8983