M&A Results for 2010 Lackluster, but KPMG Says Canada is Set for a Big Comeback

Dec 22, 2010, 08:15 ET from KPMG LLP

TORONTO, Dec. 22 /PRNewswire/ - Canadian M&A results for the year 2010 continue to disappoint based on an analysis completed by KPMG Corporate Finance. When the final tally is in, KPMG expects just over 1,800 completed M&A deals this year involving Canadian companies, for a dollar value of between US$114 billion and US$117 billon based on data supplied by Thomson Reuters SDC. Both the number of completed transactions and dollar value of deals are expected to be down slightly from last year, consistent with expected global M&A results. Canada's M&A landscape this year was in stark contrast to India and China, which experienced increases of 117 percent and 31 percent, respectively, in M&A deal value, including both outbound and inbound deals to those countries.

Private equity-sponsored deals also continued to be relatively weak at about US$3.4 billion of total deal value and approximately 3 percent of total Canadian M&A deals, which is relatively consistent with last year, but down significantly from the US$39 billion of private equity deal flow in 2007.

"The full year statistics can be deceiving given the substantial pick-up in volume and deal value during the last half of the year," said Peter Hatges, President of KPMG Corporate Finance. "The improvement in the last half of the year is a direct result of improving equity and debt capital markets and more involvement by private equity firms. Over half of the dollar value of private equity deals was done in one month—November—and all of the data for December is not in yet. Furthermore, turmoil in European markets presents significant buying opportunities for Canadian companies backed by a strong Canadian dollar."

KPMG expects M&A volume to continue to increase in the first half of 2011. Deal conditions are going to be a significant catalyst in the transaction space as value expectations and the availability of capital are more in sync than they have been over the last 2 years.

Three sectors—materials-mining, energy, and industrials—dominated the Canadian market. These sectors accounted for over 60 percent of 2010 M&A value, with materials-mining leading the pack, comprising over one-third of the deals completed.

"The value of Canadian mining deals increased dramatically in 2010 compared to 2009. The high transaction values in this sector are not surprising, given strong commodity prices driven by the continued and increasing need for commodities from emerging economies," says Brian Imrie, Head of Mining and Metals for KPMG Corporate Finance. "There will continue to be high transaction levels from domestic consolidation and high demand from foreign acquirers."

Canadian companies were acquirers in 70 percent of the 10 biggest deals in Canada to date for 2010. Eight out of the 10 were in the mining or oil and gas sector, comprising 85 percent of the top 10's total value. Kinross Gold Corp's acquisition of Red Back Mining for US$6.8 billion was the largest Canadian deal of the year. 

Hatges say, "Going into 2011, expect to see stronger participation from Canadian companies on a global M&A basis. The timing is perfect."

KPMG LLP, the audit, tax and advisory firm (kpmg.ca), a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative. KPMG International's member firms have 140,000 professionals, including more than 7,900 partners, in 146 countries.