Header image

How’s it going, Canadian M&Eh?

M&A in the Great White North is going just, well, great. Deal value to date this year has already topped the total for 2019 and virtually every year dating back to the global financial crisis (with the exception of 2012 and, even then, only by a cat's whisker).

So far this year there has been US$113.4 billion worth of completed deal flow. Much of this is due to a rambunctious first quarter, in which US$59.7 billion worth of M&A was minted, by far the strongest quarter on Mergermarket record stretching back as far as Q3 2007 (which, at US$79.8 billion, was an anomaly).

This means that, by the time Christmas rolls around, 2021 will be the strongest year for Canadian M&A since 2007—and potentially ever depending on how the next two months pan out.

Slow start

It's been a relatively long time coming for Canada. Unlike the US, which was back on form by Q3 last year, things took a while longer to warm up in America's so-called neighbor to the north. But warmed up they have.

While tech-enabled businesses across industries like healthcare have been hot during the pandemic, infrastructure is also becoming an increasingly active sector. Construction, manufacturing, energy and large real estate projects, buoyed by good financial results, are starting to shine once again.

Supported by recovering economic demand and the steady rise in oil prices, the largest Canadian deal in the first half of the year was Cenovus Energy’s acquisition of Husky Energy Inc for US$11.8 billion, positioning Cenovus as Canada’s third-largest crude oil and natural gas producer.

Doing their bidding

Such is the strength of the market recovery and competition for assets that investors are striking aggressive pre-emptive bids to get ahead of the pack. Private equity, in particular, is adopting this tack as they prioritize certainty of deal completion.

Canadian deal advisors at a recent Mergermarket panel highlighted the fact that PE funds in the country are eager to get back to work after spending much of 2020 triaging their existing portfolio companies.

This makes a lot of sense. A typical fund has a five-year investment period and, between Q2 and Q3 last year, PE clocked up a paltry US$3.8 billion in deals, which means fund managers have lost at least six months to the pandemic. The clock is ticking. PE should cast a prominent figure in the months ahead north of the border.