Despite a 9.6% decline in deal volumes in 2012, the total value of announced merger and acquisition (M&A) deals climbed 10.5% to reach its highest level since the market peak in 2007, auditing house PricewaterhouseCoopers (PwC) revealed last week in its latest deals report, ‘2012 Year in Review: Q4 Deals Quarterly and 2013 Outlook’.
Overall, there were 2 811 announced M&A transactions in 2012 worth $210-billion.
“The key driver behind this growth has been a resurgence of activity in deals valued at over $1-billion. “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,” PwC Canadian deals leader Nicolas Marcoux said.
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&As – accounting for 29% of published transaction values. In addition to the Nexen and Progress Energy deals, other transactions leading the industry to the top were the acquisition of Celtic Explo-ration by affiliates of Exxon Mobil and a joint venture agreement between Encana and PetroChina.
The real estate sector repre-sented 15% of target activity in Canadian M&As.
“With real yields on treas-uries at or below zero, inves-tors are scrambling to find other classes of yield assets and real estate M&As are a clear beneficiary of this,” Marcoux said.
The metals and mining sector was third, 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 fourth-quarter 2012 M&A activity.
Marcoux said he expected 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.
The report also found 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 a total of $123-billion, or more than 58% of all deal values during the past year.
Domestic M&As accounted for 40% by value of activity in 2012, with the top three industries – energy, real estate and metals and mining – representing more than 57% by dollar value of all domestic transactions last year. The value of outbound M&As in 2012 saw a fourth consecutive year of growth and reached a postcrisis high as Canadian companies continued to look for global investment opportunities.
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 US (20%) and Switzerland (12%) leading the charge.