Canada M&A volumes rise but dealmakers cautious about near-term pickup

By Maiya Keidan

TORONTO (Reuters) - Canadian deal volumes rose 13% in the third quarter buoyed by an improving acquisition financing market, but deal advisors cautioned that high interest rates could dampen near-term dealmaking sentiment.

For the quarter ended Sept. 30, Canadian M&A volumes stood at $46.6 billion, up from $41.2 billion from the same period last year, according to data from Refinitiv.

"We're at a point right now where it's not entirely clear whether we are through the worst of the slowdown or we have a few months to go," said Mike Boyd, Managing Director and head of Global M&A at CIBC.

"We need for the central banks to indicate they are not going to be continuing interest rate hikes. If we have that, we will have stability in the equity and debt markets."

Dealmakers said activity levels had moved closer to pre-pandemic levels. Canadian M&A volumes stood at $50.7 billion for the September quarter in 2019, according to Refinitiv data.

"If you look at deal volumes in Canada it feels like we are starting to return to activity levels that are more in line with those that we’ve seen over a long-term average," said Ben Mandell, head of Canadian M&A at RBC Capital Markets.

"High interest rates and macro data will continue to impact M&A activity. However, it’s a positive sign that we’ve seen confidence in accessing financing from debt and equity markets to execute deals."

Notable deals during the quarter included Enbridge's $14 billion acquisition of three utilities from Dominion Energy. Enbridge raised about C$4 billion ($3.35 billion) by selling new shares at a discount to help finance the deal.

The capital raise for the Enbridge deal buoyed Canadian equity capital markets (ECM) issuance to a two-year high of C$7.5 billion in the third quarter of 2023, up from C$3.5 billion from the same period last year.

Canadian corporate debt issuance fell to C$14.8 billion in the third quarter, down from C$10.5 billion during the same period last year.

"I do think the worst is behind us," said Peter Miller, Managing Director at BMO Capital Markets. "We are seeing more activity but we need rates to hit peak."

Citigroup, Goldman Sachs Group and BMO Capital Markets were ranked the top three M&A advisors during the quarter, according to Refinitiv.

($1 = 1.3729 Canadian dollars)

(Reporting by Maiya Keidan in Toronto; Editing by Anirban Sen and David Gregorio)