Canada M&A activity less than blockbuster in 2013

Canada was a hot market for mergers and acquisitions last year, but the size of the deals didn’t do much to pad the incomes of investment bankers behind them, a new report shows.

Data compiled by The Mergermarket Group shows Canada had its best M&A performance in more than a decade, when measured by deal count.

Still, it was the slowest year for deal value since 2004.

There were 567 deals valued at $71.8 billion (U.S.) in Canada last year, which Mergermarket described as “an interesting turnaround.”

The volume was bigger than the 2007 peak of 559 deals, but a third of the value at that time of $192.6 billion.

Of course, 2007 was the year before the global financial crisis, which ravaged stock prices and in turn valuations of a number of companies.

Since then, companies have been careful not to overpay for assets and the number of blockbuster, multi-billion deals has subsided. Consider Rio Tinto’s $38-billion purchase of Montreal-based Alcan in 2007, the largest completed takeover in Canadian history, which in hindsight was much too rich.

Mergermarket says a lack of large-cap deals is to blame for the drop in overall M&A values in 2013.

The value of transactions worth more than $250 million totaled $54.4 billion in 2013, its lowest level since 2004 when the value was $29.4 billion. There were 42 deals over $250 million in both years.

Meantime, mid-market and smaller deals have increased. There were 525 smaller deals worth a total of $17.4 billion, up almost 27 per cent by value and 22 per cent in volume versus 2012.

The big story in Canadian M&A last year was in the grocery aisle, with two big takeovers. First, Sobeys Inc.’s said in June it would pay $5.8 billion to buy Safeway's Canadian assets, while Loblaw Co. Ltd. said in July it would buy Shoppers Drug Mart Corp. in a $12.4-billion cash-and-stock deal.

Also in the retail space, Hudson's Bay Co. said it was buying high-end American brand Saks Inc. in a deal valued at $2.9 billion.

Mergermarket said M&A in the drugstore area accounted for 27 per cent of the annual total, up from about 4 per cent in 2012.

The resources and utilities sector, which once dominated M&A, fell to a 32-per-cent share of Canadian M&A last year, down from nearly 60 per cent in 2012.

Imperial Oil’s $2 billion purchase of a 50-per-cent stake in Celtic Exploration was one notable deal in that sector.

The Loblaw’s deal was the largest for the year, followed by the Sobey’s-Safeway transaction.

The third largest was Brookfield Property Partners LP’s $5.2 billion acquisition of the 49 per cent of Brookfield Office Properties it didn’t already own.

Much of the takeover interest came from within North America, or about two-thirds of both the value and volume of deals, according to the report. About 23 per cent of the deals by numbers came from Europe and 11 per cent from Asia-Pacific. By value, 20 per cent were from Europe and 15 per cent from Asia-Pacific.