Private equity fizzles as M&A volume drops - KPMG

Canadian deals decline two years in a row

TORONTO , Jan. 4 /CNW/ - Canadian mergers and acquisitions (M&A) deal volume fell again this year, according to an analysis completed by KPMG Corporate Finance. There were 2,110 completed M&A deals last year involving Canadian companies, for a dollar value of approximately US $129 billion , according to data supplied by Thomson Reuters SDC. Although the number of deals was down approximately 4% from the previous year, total deal values were down 20% from 2008.

Private equity-sponsored deals continued their steep downward trend, accounting for only 2.5% of all Canadian M&A deals and amounting to only $3.2 billion of the $129 billion worth of Canadian M&A deals in 2009. This represents a 92% decline in private equity deal values involving Canadian companies from 2007, which amounted to almost US $39 billion .

"Debt capital markets and economic conditions made it difficult for private equity to compete for transactions in 2008 and the downward trend accelerated in 2009," said Peter Hatges, President of KPMG Corporate Finance. "In this market, companies experiencing financial and market difficulties present opportunities for strategic buyers, and challenges for private equity buyers. But don't count private equity out yet, they still have a lot of capital to deploy."

From a sector perspective, mining, and oil and gas continue to do well. Mining and metals were highly active in M&A deals this year. Approximately one-third of all Canadian M&A deals were in the metals and mining sector, with a value of US $9.2 billion . Oil and gas accounted for approximately 14% of the deals, worth US $70.7 billion ; constituting 55% of total Canadian M&A deal values. The Petro-Canada/Suncor merger, and EnCana Corporation's spin-off of Cenovus Energy Inc. led the way with a combined total deal value of over US $41.6 billion .

"The high volume of deals in mining and metals is not surprising, given tight credit conditions and the need for companies to realize synergies at each opportunity," said Brian Imrie , corporate finance partner at KPMG responsible for mining and metals. "Moreover, the abundance of Asian capital looking at the sector will result in significant opportunities for a lot of different players. The issue facing Canadian mining companies is that the search for capital and strategic partners has become a global exercise that knows no boundaries."

On the bright side, Canadian companies were the acquirer in seven of the top 10 Canadian deals this year.

    
    Top 10 Deals - Canadian
    Involvement for the year ended
    December 31, 2009

    -------------------------------------------------------------------------
                                                         Target
                                            Target     Ultimate
    Date          Target       Target     Ultimate       Parent    Acquirer
    Effective      Name        Nation       Parent       Nation      Name
    -------------------------------------------------------------------------
    06-Feb-09  Puget Energy    United     Puget Energy    United    Padua
               Inc             States     Inc             States    Holdings
                                                                    LLC
    -------------------------------------------------------------------------
    30-Nov-09  Cenovus Energy  Canada     EnCana Corp     Canada    Share-
               Inc                                                  holders
    -------------------------------------------------------------------------
    22-Jan-09  Dunedin Hldg-   United     George Weston   Canada    Grupo
               US Bread Making States     Ltd                       Bimbo
                                                                    SAB
                                                                    de CV
    -------------------------------------------------------------------------
    07-Jun-09  NOVA Chemicals  Canada     NOVA Chemicals  Canada    IPIC
               Corp                       Corp
    -------------------------------------------------------------------------
    03-Aug-09  Petro-Canada    Canada     Petro-Canada    Canada    Suncor
                                                                    Energy
                                                                    Inc
    -------------------------------------------------------------------------
    07-Jul-09  Macquarie       Australia  Macquarie       Australia Canada
               Communications             Communications            Pension
                                                                    Plan
    -------------------------------------------------------------------------
    10-Sep-09  Thomson Reuters United     Woodbridge Co   Canada    Thomson
               PLC             Kingdom    Ltd                       Reuters
                                                                    Corp
    -------------------------------------------------------------------------
    18-Aug-09  Addax           Switzer-   Addax           Switzer-  Mirror
               Petroleum Corp  land       Petroleum Corp  land      Lake Oil
                                                                    & Gas
                                                                    Co Ltd
    -------------------------------------------------------------------------
    Ol-Oct-09  TriStar Oil &   Canada     TriStar Oil &   Canada    Petro-
               Gas Ltd                    Gas Ltd                   bank
                                                                    Energy &
                                                                    Resources
    -------------------------------------------------------------------------
    22-Dec-09  Harvest Energy  Canada     Harvest Energy  Canada    KNOC
               Trust                      Trust
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                 Acquirer        Ranking
                                Acquirer         Ultimate         Value
    Date        Acquirer        Ultimate         Parent       inc. Net Debt
    Effective   Nation          Parent           Nation     of Target ($Mil)
    -------------------------------------------------------------------------
    06-Feb-09   United States   Padua Holdings   Canada          6,716.72
                                LLC
    -------------------------------------------------------------------------
    30-Nov-09   Canada          Shareholders     Canada         23,312.88
    -------------------------------------------------------------------------
    22-Jan-09   Mexico          Grupo Bimbo      Mexico          2,500.00
                                SAB deCV
    -------------------------------------------------------------------------
    07-Jun-09   Utd Arab Em     UAE              Utd Arab Em     2,267.82
    -------------------------------------------------------------------------
    03-Aug-09   Canada          Suncor Energy    Canada         18,245.80
                                Inc
    -------------------------------------------------------------------------
    07-Jul-09   Canada          Canada Pension   Canada          6,455.02
                                Plan
    -------------------------------------------------------------------------
    10-Sep-09   United States   Woodbridge Co    Canada          4,938.41
                                Ltd
    -------------------------------------------------------------------------
    18-Aug-09   Canada          Peoples          China           9,024.49
                                Republic
                                of China
    -------------------------------------------------------------------------
    Ol-Oct-09   Canada          Petrobank        Canada          2,698.11
                                Energy
                                & Resources
    -------------------------------------------------------------------------
    22-Dec-09   South Korea    South Korea       South Korea     3,863.24
    -------------------------------------------------------------------------

    Source: Thomson Reuters SDC
    

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