This year's M&A activity to be led by private equity and emerging market
TORONTO, Jan. 25 /CNW/ - With record-breaking cash in company coffers
and the return of market confidence, more deal activity and private
equity (PE) exits are on the horizon for 2011, according to Ernst &
Young. M&A deals will be less about unloading underperforming assets
and more about executing strategic deals in order for companies to
achieve their long-term growth strategies.
"In Canada, private equity's comeback in 2010 proved its ability to
adapt to a changing economic environment," said Joe Telebar,
Transactions Advisory Services Partner at Ernst & Young. "This year, we
expect to see the return of targeted deal activity as the tailwinds of
2010 propel leading companies back into the market."
Despite a few bumps in the road, PE led M&A recovery in 2010. While M&A
emerging-market activity increased in volume by 6% and value by 46%
globally, companies continued to move cautiously against the backdrop
of an uncertain economic future. PE firms announced 38 acquisitions
valued at US$1705.98 million as of December 2010, a value increase of
27% from the previous year. PE global deal volume is also up by 10%,
with value up over 90%, according to Dealogic.
"In Canada, the M&A outlook is optimistic as renewed confidence replaces
the old concerns that prevented companies from entering the market,"
said Telebar. "Now, as some of PE's highest profile buyouts from 2006
and 2007 are on the 'auction block,' we anticipate an increase in
M&A is on the long-term corporate agenda, with 54% of global companies
planning to do deals within the next two years. Canada is no exception.
Exits from portfolio companies will become the new focus as companies
face a friendlier selling environment. The momentum of secondary
transactions will also continue into 2011 as firms look to sell
businesses held longer than the average holding period.
Improved cash and credit conditions will continue to fuel PE firm deal
activity and increase buyouts of larger transaction sizes. Direct
investing, currently a small percentage of total institutional
investing, could also gain popularity as large deals are completed.
Should the Canadian model, with a 20-year cycle and virtually no
capital outflows, deliver attractive returns, it could lead other large
institutional investors to form their own funds.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 141,000 people are united by our
shared values and an unwavering commitment to quality. We make a
difference by helping our people, our clients and our wider communities
achieve their potential.
For more information, please visit ey.com/ca.
Ernst & Young refers to the global organization of member firms of Ernst
& Young Global Limited, each of which is a separate legal entity. Ernst
& Young Global Limited, a UK company limited by guarantee, does not
provide services to clients.
For further information: