Not a 'V' shaped recovery as consecutive quarterly pace has slowed by 12%
TORONTO, July 14 /CNW/ - PricewaterhouseCoopers (PwC), in its second quarter roundup of the Canadian M&A market, is reporting a 15% increase in the number of announced Canadian deals and a 26% increase in the aggregate value of announced deals. These results are in contrast to the U.S. market, where deal volumes in 2010 are at a decade low.
While this quarter's growth is noteworthy, the consecutive quarterly pace of deal volume growth has slowed by 12%. "As the second quarter ended, we noted a shift in mood from cautious optimism to just plain caution," notes Kristian Knibutat, national Deals leader for PwC. "While we do not anticipate a retrenchment in activity for Q3, we believe that the M&A recovery will be shallow and slow, dominated by well-capitalized corporations and large pension funds."
PwC has identified four key deal trends based on the latest Q2 figures:
- Improved access to leverage resulted in heightened "mega deal" and
financial buyer activity. The leveraged lending rally of the first
quarter continued through the second quarter. This improved access to
deal capital enticed large financial players into the deal market:
Measured by value, Private Equity's share of the Q2 deal market rose
to 25%, its highest proportion since 2007. Access to deal capital
also permitted a subdued comeback in "mega deals:" the number of
deals valued at (greater than)$500 million involving a Canadian
entity doubled over Q2 2009.
- M&A is being utilized by corporates to get "back to basics." In an
economy that remains volatile and uncertain, many Canadian corporates
are engaging in M&A to tighten operational focus or to achieve
economies of scale. This trend is in stark contrast to the 2005 to
2008 period when a more common strategic rationale for corporate
deals was to diversify operations.
- Foreign buyers continue to actively acquire Canadian assets. Few
Canadians are looking past the U.S. border. Meanwhile, foreigners
continue to scour the Canadian market. In particular, the Asian
buying spree of Canadian assets that started in 2007 intensified this
quarter, with the oil patch attracting considerable attention. For
example, in the largest Chinese investment ever completed in Canada
and the second largest Chinese investment ever made in North America,
state-owned oil company, Sinopec acquired a 9.03% stake in oil sands
leader ConocoPhillips for $4.65 billion.
- The energy and resource sectors are differentiating the Canadian deal
experience. Canada's dominance in the materials deal space is a
"natural hedge" for our domestic deal market. These industries are
being viewed by global investors as "safe havens" in an uncertain
environment. Energy and materials deals represented 46% of all
Canadian M&A activity this quarter with metals and mining take the
lion's share of volume at 29%.
PwC deal data includes announced M&A translations involving at least one Canadian entity and the source of all of our data is Capital IQ and S&P LCD. The full six-page report including graphs and detailed analysis is available from the contacts below. Go to this url to subscribe to the bi-weekly capital market series: www.pwc.com/ca/QuarterlyDeals
About PricewaterhouseCoopers' Deal Team
PricewaterhouseCoopers' 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 practice(1), and with our global Corporate Finance group being 2010 Upper Mid Market M&A Advisor of the Year(2), the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.
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PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
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. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity.
(1) Source: Kennedy; "Business Advisory Services Marketplace 2009-2011"; (C) BNA Subsidiaries, LLC. Reproduced under license.
(2) Source: Acquisitions Monthly Awards 2010
For further information: For further information: David Rowney, 416 365 8858, email@example.com; Jessica Draker, 416 869 8723, firstname.lastname@example.org; www.pwc.com/ca/news