Q1 M&A down 60% on previous quarter, but lively mid-market keeps volumes up: PwC

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Plus: Canadian CEOs more bullish on acquisitions in 2013 than global counterparts

TORONTO, May 9, 2013 — While mega-deals fell silent, mid-market activity took reign in the first quarter of 2013, according to the latest PwC Capital Markets Flash Report. The average deal size last quarter was $85 million, with just four deals over $1 billion. Of the 570 tallied deals, 39 were over $100 million. According to the report, the Canadian real estate sector is responsible for the quarter’s largest M&A deal — H&R REIT and KingSett Capital Consortium’s $4.5 billion deal for the assets of Primaris REIT. Real estate is also one of the most active sectors by both volume and value, with real estate investment trusts (REITs) accounting for over 90% of activity in the sector, which equates to a third of total deal value across all sectors.

Canadian real estate has been one of the steadiest areas for investors in the last five-plus years, states the report. “If you’re a quality REIT with a good track record today, you have easy access to capital,” says Don Fitzpatrick, President of PwC’s Deals real estate practice. “If most of the established REITs want to go to market to raise a few hundred million dollars, they can do so very quickly.”

Canadian pension funds also made an impression on the Q1 stats. Their continuing global search for high quality assets produced overseas infrastructure acquisitions that were three of the largest deals in Q1. “Canadian pension funds are looking to diversify their holdings away from their historical over-weighting in Canada,” says Richard Pay, Transaction Services Partner, PwC. “ They’re continuing to be more active and innovative in managing their funds than their global counterparts. This has been demonstrated by their investments across a wide range of asset classes, sectors and geographies.”

The report also indicates that debt financing terms for high quality businesses are back to pre-crisis levels. “There’s sufficient liquidity in the market for the right players, but it’s only for the right assets, which means strong cash-generative issuers that present little down-side risk,” says Nicolas Marcoux, Canadian Deals Leader, PwC.

Canadian CEOs more bullish on acquisitions in 2013 than global counterparts
Looking at the Canadian M&A components of PwC’s 16th Annual Global CEO Survey, results show that in terms of looking forward, Canadian respondents were more bullish than their global counterparts when it comes to the likelihood of growing their companies through acquisitions, joint ventures or strategic alliances in 2013.

Canadian CEOs are becoming more confident about forward economic prospects, largely because of the slow-but-sure improvements in the U.S. “Recent economic uncertainty has led to many companies reigning in the more aggressive aspects of their growth strategies over recent years. Returning confidence, together with strong balance sheets and market liquidity, will continue to increase levels of M&A activity,” says Marcoux.

PwC’s Capital Markets Flash Report is available at http://www.pwc.com/ca/quarterlydeals. A copy is also available from the media contacts. Note, all dollar values are in American in the Capital Markets Flash Report; Dollar figures in the PwC 16th Annual Global CEO Survey are Canadian.

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, the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.

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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 close to 169,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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1Source: Kennedy; “Business Advisory Services Marketplace 2012”; © BNA Subsidiaries, LLC. Reproduced under license.