Pension fund & bank M&A shelters Canadian M&A market from a severe downturn: PwC

Canadian M&A market defies gravity in Q3 2011, up over the comparable quarter in 2010

TORONTO, Oct. 28, 2011 — The third quarter saw an uptick in Canadian M&A volumes and values by 8% and 1% compared to the same quarter last year, says PwC in its Capital Markets Flash report www.pwc.com/ca/QuarterlyDeals.

However, if not for large financial institution and pension fund buying, the last three months would have been rather bleak. Excluding a small number of large Canadian pension fund deals, the value of Q3 M&A was 25% lower than Q2 (also excluding pension fund activity). In what PwC characterized as a Bay Street versus Main Street dynamic, less than 1% of Q3 transaction volumes contributed 59% to aggregate deal values.

Overall, in Q3 2011 there were 756 Canadian M&A announcements worth close to $51 billion.

“This quarter was characterized by opportunistic buying and selling by Canadian banks, pension funds and REITS,” says Kristian Knibutat, PwC’s Canadian deals leader. “Even the mining sector, a traditional M&A leader in our market, saw a decline in activity. An absence of “mega deals” in base metals and ores drove down quarter-over-quarter deal values in the materials sector by close to 66%,” he says.

The report highlights that Canada’s middle market, defined as $100-$500 million, suffered a fourth consecutive quarterly decline with the number and value of M&A deals dropping by 23% and 29% respectively. “Despite weakness in the middle market, we did observe some pockets of strength. For the first time since the credit crisis, there was a quarter over quarter increase in middle market industrial M&A, the first sign of strength in this critical Canadian M&A sector since the credit crisis.”

In conjunction with its quarterly deals update, PwC also released today a report comparing M&A activity among the provinces over the last decade. This report is available at www.pwc.com/ca/QuarterlyDeals and the press release at www.pwc.com/ca/media. Among other findings, it shows that Ontario and Quebec are among the top three investment destinations in Canada, but each province has lost market share to the western provinces over the past decade.

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.

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¹ Source: Kennedy;”Business Advisory Services Marketplace 2009-2011”; ©BNA Subsidiaries, LLC. Reproduced under license.
² Source: Acquisitions Monthly Awards 2010