TORONTO (miningweekly.com) – Retail, real estate, utilities and pension fund activity were not enough to fill the gap left by a dearth of deals in Canada's oil patch and mining companies.

Even life sciences chipped in with large deals in the fourth quarter, but it was not enough to prevent 2013 being the slowest year since 2009, according to professional services firm PwC's latest ‘Capital Markets Flash’.

Overall in 2013, 2 500 deals worth $162-billion were announced.

"We started 2013 with optimism since equity and debt were both available and the economic backdrop was improving,” PwC Canadian deals leader Nicolas Marcoux said.

At the risk of appearing over-optimistic again, Marcoux indicated that 2014 appeared to have the key mergers and acquisitions (M&A) ingredients that were lacking in 2013 – higher valuations in the public markets and strong positive market sentiment.

"The S&P 500 advanced by nearly 30% in 2013 and the markets actually continued to gain after the US Federal Reserve openly put parameters around the tapering out of quantitative easing, something that would have sent the market plummeting 12 months ago. This sentiment should help investors bridge the valuation gap with sellers as they start to feel more confident about the future," Marcoux said.

In the last three months of 2013, the 716 deals with a total value that was 26% below the same period of 2012, was not a great finish, but the $44-billion total was not out of line with post-crisis performance, PwC said.

The sector breakdown for the quarter showed utilities and energy accompanying real estate at the top of the value table, with a surprise appearance from the life sciences sector with two deals of more than $1-billion.

"The US biotech industry has been very healthy – putting American companies in a position to pursue Canadian targets. There's a scarcity of good, revenue-producing companies in this sector, and the leading Canadian companies are attractive targets.

“Expect to see a surge of financing in the life sciences sector this year as investors cycle cash back into earlier-stage ventures,” PwC MD for corporate finance Nitin Kaushal said.

M&A OUTLOOK: 2014 VERSUS 2013

Equity remained available and was looking for a return; similar to 12 months previously, as corporates and private equity funds have significant resources available and part of that would translate into M&As.

The question was, however, whether that cash was getting more impatient. It is almost a certainty for the private equity funds, but corporates could always return the excess to shareholders as they did in 2013.

Debt was (still) available and cheap. PwC said Canadian interest rates appeared to remain low for some time. The difference from 12 months ago was that pundits now considered rates might rise in the US before they rise here.

Further, the Canadian dollar had said goodbye to parity and most analysts were pointing to a gradual, but steady decline throughout 2014, which boded well for export sectors.

Canada's direct-investing pension funds were also expected to perform well in 2014 – similar to 2013. The analysts expected them to continue to invest in real estate and infrastructure, but also to continue partnering with private equity players further up the risk/reward ladder.

Record levels of household indebtedness would likely lead to problems for retailers, but the resulting margin squeeze might continue to drive M&A activity as the scale became ever more important.

"With the US economic recovery and public company valuations far ahead of where they were a year ago, we expect the biggest push toward increased M&As in 2014 will come from sellers finally getting what they regard as a reasonable price from more confident buyers,” Marcoux concluded.