Acquisitions in the utility sector and a major cross-border pipeline transaction helped drive the volume of Canadian M&A activity up 48 percent in the first quarter of 2016, even though the number of deals declined.
Thomson Reuters data released on Thursday showed the overall number of deals in the period fell 18 percent to 511 from a year earlier, while the deal value surged to US$67.9 billion from US$45.9 billion a year ago.
The top three deals in the quarter – TransCanada Corp‘s acquisition of Columbia Pipeline Group, Fortis Inc‘s buyout of ITC Holdings and the merger between Waste Connections Inc and Progressive Waste Solutions – accounted for nearly half of the total deal value.
The heightened cross-border deal flow propelled Goldman Sachs, Lazard and Wells Fargo to the top three spots.
“I do think you will continue to see more Canadian companies looking for growth opportunities in the U.S. market,” said Darin Deschamps, co-head of Wells Fargo Securities Canada.
“And we will continue to see equity investors supporting management teams in companies that have acquisitions that are on strategy and drive a company’s strategic objectives.”
Morgan Stanley, Bank of Nova Scotia and Barclays rounded out the top six spots in Canada in a quarter that also saw some significant deals in the retail and media industries. In the quarter, Lowe’s Cos struck a deal to buy Rona Inc and Corus Entertainment Inc agreed to acquire sister entity Shaw Communications Inc‘s media arm.
The top three law firms in the league tables that advised on deals with Canadian involvement were Simpson Thacher & Bartlett; Osler Hoskin & Harcourt LLP; and White & Case LLP.
“We are seeing more and more cross-border deals. The U.S. economy continues to be solid and a desirable place for foreign companies to invest, including Canadian companies,” said Lee Meyerson, head of M&A at New York-based Simpson Thacher & Bartlett, which advised on the the quarter’s two biggest deals.
The strong start comes after the second highest-ever level of Canadian M&A activity in 2015 and a record year globally. Advisors don’t expect 2016 to be as robust.
“M&A activity levels will be more volatile than last year, and less predictable from month to month, although overall we expect it to be another strong year,” Meyerson said. “Every CEO and board has to take into account the potential for market volatility, which could gyrate stock prices, for example, when planning an acquisition or sale.”
(Reporting by Euan Rocha and John Tilak)
Photo courtesy of TransCanada Corp