2012 Canadian M&A deal values reach post-crisis high: PwC

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Canadian buyers busy both at home and abroad; Mega deals in energy and real estate lead the charge

TORONTO, January 29, 2013 — Despite a 9.6% decline in deal volumes in 2012, the aggregate value of announced deals climbed 10.5% to reach its highest level since the market peak in 2007. Overall, there were 2,811 announced M&A transactions worth $210 billion in 2012 according to PwC’s latest deals report: 2012 Year in Review: Q4 Deals Quarterly and 2013 Outlook.

“The key driver behind this growth has been a resurgence of activity in deals valued at over $1 billion,” commented Nicolas Marcoux, Canadian Deals Leader, PwC. “These ‘mega-deals’ accounted for $123 billion in 2012, an increase of some $30 billion over 2011, which compensated a modest decrease in the aggregate value of sub-$1 billion M&A activity.”

The resource industries and the real estate sector continued to dominate in 2012:

The energy sector regained the title of the top targeted industry in Canadian M&A – accounting for 29% of published transaction values. In addition to the Nexen Inc. and Progress Energy deals, other transactions leading the industry to the top were the acquisition of Celtic Exploration by affiliates of Exxon Mobile Corp and a joint venture agreement between Encana Corp. And PetroChina.
The real estate sector represented 15% of target activity in Canadian M&A. “With real yields on treasuries at or below zero, investors are scrambling to find other classes of yield assets and real estate M&A is a clear beneficiary of this,” says Marcoux.
Rounding out a top three finish is the metals & mining sector, representing 11% by value of Canadian M&A target activity. The announced takeover by First Quantum Minerals of Inmet Mining was a key transaction behind the jump in the value of Q4 2012 M&A activity.

Looking forward, Marcoux sees good prospects for sustained growth in the Canadian M&A market thanks to low interest rates, a surplus of cash both on corporate balance sheets and in the hands of pension and private equity funds and plenty of liquidity in the debt market.

Other perspectives in PwC’s 2012 Year in Review: Q4 Deals quarterly and 2013 Outlook include:

The return of the mega deal – More mega deals were announced in 2012 than at any other time in the past five years. The 49 deals over $1 billion were worth an aggregate $123 billion, or more than 58% of all deal values during the past year.
Canadian investors at home and abroad – Domestic M&A accounted for 40% by value of activity in 2012, with the top three industries – energy, real estate and metals & mining – representing more than 57% by dollar value of all domestic transactions last year. The value of outbound M&As in 2012 saw its fourth consecutive year of growth and reached a post-crisis high as Canadian companies continue to look for global investment opportunities.
Inbound M&A – Foreign acquisitions of Canadian targets accounted for 27% of total M&A activity. Five countries were responsible for 89% of all inbound activity with companies headquartered in China (39%), the U.S. (20%) and Switzerland (12%) leading the charge.

PwC’s 2012 Year in Review: Q4 Deals quarterly and 2013 Outlook is available at http://www.pwc.com/ca/en/deals/canadian-quarterly.jhtml. For more information, please visit: www.pwc.com/ca/en/retail-consumer/index.jhtml. A copy is also available from the media contacts.

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PwC’s Deals 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, 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 more than 180,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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