Despite global setbacks, measured growth expected for 2012
TORONTO, Jan. 20, 2012 /CNW/ - Amidst a year of turmoil, Canadian
dealmakers were motivated and busy in 2011, with volumes hitting an
all-time high of 3,173 M&A transactions, worth $189 billion. A report
released today by PwC, available at www.pwc.com/ca/quarterlydeals, also points to deal values rising by 22% compared to 2010 and double
the 2009 value tally (deal values still do remain well off the 2007
peak). Many Canadian entities were focused outward this year with the
percentage of Canadian M&A deals involving a domestic target dropping
to 51%, down from a high of 81% in 2006.
"Canada is coming off a strong year, despite a number of economic
setbacks globally. As a country we stepped onto the world stage and
have established a level of credibility that we view as extremely
noteworthy," says Kristian Knibutat, PwC's Canadian Deals Leader.
The report shows that Canadian deals represented 10% of the global M&A
market in 2011, up from 7% at the 2007 market peak. Also, for the first
time in history, the value of Canadian acquisitions into the US
outpaced the value of US-led deals in Canada.
In 2012, Canadian M&A will likely move forward at a measured pace. The
report says: "We anticipate Canadian M&A to outpace global M&A growth
rates and end the year in-line or moderately below the 2011 domestic
tempo." PwC outlines five trends that will help to shape the 2012 deal
Low debt yields in North America will provide support for continued
Canadian M&A. Demand for real assets, private companies and cash flow
positive investments should be strong, especially in the real estate,
infrastructure, utilities, extractive resources, timber and agriculture
Government austerity measures in the developed world will present unique
investment opportunities for Canadian pension funds and specialized
infrastructure and project finance firms (via government
privatizations, equity reductions or P3 projects).
Public market volatility will create a bias for reallocating portfolios
in favour of private investments. Mid-size undervalued public companies
will be particularly attractive targets to private equity players
hungry for take-private opportunities.
As more baby boomers retire and as a buyers' hunt for good private
middle market targets intensifies, the Canadian family succession wave
will begin to gradually materialize
More emphasis on growth markets, and a more innovative "deal mindset"
will emerge as the reality of anaemic growth in the west sets in. A
recent global PwC report elaborates on this, available at www.pwc.com/ca/EMDeals
A sneak peek at 2012 via comparison of the first 16 days of the year
against 2005-2011 revealed that M&A deal values are already off to a
DEAL TRENDS FROM 2011
Robust growth. As previously noted, deal volumes and values showed a positive trend,
with many Canadian entities being in the enviable position of being
able to pick up foreign carve outs. As well, the post-crisis
renaissance of middle market M&A continued with 188 middle market
transaction announcements worth $43 billion. Worth noting however, is
that demand/supply imbalances in the market meant that the latter
sector had two consecutive quarters of decline in 2011.
Motivated buyers. Not only did M&A volumes hit an all-time annual high, but the number of
deal cancellations was at an all time low. We were also treated to some
dramatic high profile bidding wars.
A rebound in deal multiples. This was not a "fire sale" market. Across North America, the average
Leveraged Buy Out (LBO) EV/EBITDA multiple was 9.4x, just shy of the
2007 market peak (9.7x) and nicely recovered from 2009 crisis lows
(7.7x). Multiples varied broadly across sectors.
Active private equity market. Last year was a busy year for PE funds. In Canada, domestic funds were
involved in 215 deals worth $52 billion. This represented 28% of all
Canadian M&A activity, measured by value, up from market share in each
of the three years prior.
A more varied group of sectors were active. Post-crisis, extractive resources (oil, natural gas, gold, mining
commodities, etc) have typically accounted for more than half of all
Canadian M&A values. This year, these industries led by a narrower
margin as a more varied group of sectors was also active. By measures
of deal value the top five Canadian M&A sectors were: metals and mining
(19%), real estate (16%), energy (16%), financials (12%) and
The report also explains other trends which made 2011 different from
other years, such as more collaboration among buyers, more activity in
global markets and increased interest by emerging market foreign buyers
in Canadian companies.
Predicting how 2012 will turn out is proving to be difficult, says
Knibutat. "There is much uncertainty and the world is waiting for a
number of events to unfold. The most likely scenario is that Canadian
M&A will move along at an 'unremarkable' pace, but forward
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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.
About PwC Canada
PwC Canada helps organizations and individuals create the value they're
looking for. More than 5,700 partners and staff in offices across the
country are committed to delivering quality in assurance, tax,
consulting and deals services. PwC Canada is a member of the PwC
network of firms with close to 169,000 people in 158 countries. Find
out more by visiting us at www.pwc.com/ca.
© 2012 PricewaterhouseCoopers LLP, an Ontario limited liability
partnership. All rights reserved.
PwC refers to the Canadian member firm, and may sometimes refer to the
PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
1 Source: Kennedy;"Business Advisory Services Marketplace 2009-2011" ©BNA
Subsidiaries, LLC. Reproduced under license.
2 Source: Acquisitions Monthly Awards 2010
SOURCE PwC Management Services LP
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