Articles - December 2018

  • In the recently released EY Global Capital Confidence Barometer, the following question is posed:

    Can complex geopolitical uncertainty and a healthy, active M&A environment co-exist?

    The simple answer is yes, based on survey results reflecting the expectations[1] of 2300 executives in 43 countries including Canada, which is where we will focus. While geopolitical uncertainty is regarded as a significant risk factor, there is an overriding focus on other drivers (including, paradoxically, an interest in cross-border transactions) that are likely to fuel M&A activity. 

    Read our full article to learn more.

     

    [1] Expectations have proven to be predictive of M&A activity, but the predictive power weakens over a relatively short period.  For example, see “Can Business Expectations predict Merger Activity?”

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  • You’ve spent years, decades even, building your business.  And along the way, you’ve figured things out, learned from your mistakes, and realized success.  Now you’re ready to consider an exit strategy; maybe you’re thinking about selling imminently, or in the next five years.  You have friends and colleagues who have gone through this. Some have hired M&A advisors, while others opted to do it themselves, as they’ve always done, avoiding the advisory success fee in the process. 

    What should you do?  Does an M&A advisor create tangible value in a sale of business, or given the associated fees, and the knowledge you have of your industry, does it make more sense to do it yourself?

    As an M&A advisory firm, we recognize that our own views on these issues would (rightfully) be perceived as biased, so we sought out independent sources to provide answers.   While we found several relevant discussions and papers, the most compelling, because of the authors’ independence and the significant sample size examined, was a research paper from the University of Alabama that specifically considered whether “Hiring M&A Advisers Matter[s] for Private Sellers”.

    Please click "Open in Browser" to read our full article.

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  • Canadian M&A – Our Q2/2017 Review

    Posted By: Karen Fisman and Yingxi Liao

    At Valitas, with our focus on Canadian mid-market M&A, it’s been a busy second quarter.  This week, we reviewed announced deal data sourced from Capital IQ to measure activity for the broader Canadian market.  We were also fortunate to speak with Jay Hoffman, Leader of Miller Thomson’s National Corporate and Mergers and Acquisitions Practice, about his perspective on mid-market M&A activity.

    While Q2, 2017 lacked the energy sector mega-deals[1] that propelled value in Q1, total deal value was up almost 15% over Q2, 2016, at $59 billion[2], with volume remaining relatively flat at 757 transactions.  Energy and Utillities were top performers, with the two largest deals of the quarter coming out those sectors.  Excluding transactions exceeding $1 billion, deal value increased by 10% in the quarter on volume that was almost unchanged from Q2, 2016. Cross-border transactions represented more than half of activity by value and volume, with inbound and outbound deals increasing slightly in both categories over the previous year.

    Please click "Open in browser" to read our full article.

     

    [1] For example, the $17.7 billion Cenovus acquisition of ConocoPhillips’ Canadian oil sands assets.

    [2] All dollar amounts are Canadian unless stated otherwise.

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  • Over the past couple of years, Chinese outbound M&A has reached record high levels, hitting a peak of US$227 billion in 2016, and more than doubling its 2015 level.  In November 2016, the Chinese State Council announced that new capital controls would be put in place, effective January 2017, to reduce this outflow of currency.

    Chinese investment in Canada differs from the global pattern.  Deal activity peaked in 2012, with China taking first place in the rankings of inbound M&A, but dropped off in subsequent years as commodity prices fell.  In 2016, however, Chinese inbound deal activity in Canada was back in the top three, ranking by value behind the U.S. and the U.K..

    We were curious about whether the new Chinese capital controls were impacting Chinese M&A activity in Canada, and were fortunate to speak with Chris Flood, counsel at Blakes, who has extensive experience advising Chinese corporate and financial investors on M&A transactions in Canada.  

    Please click on “Open in Browser” for Chris’s insights, and to read our full article.

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  • Why, with our focus on Canadian mid-market M&A, are we writing about the U.S. Middle Market?

    U.S. middle market companies[1] generate 33% of U.S. private sector GDP, and as such, represent a significant economic force.  According to a recent survey conducted by the National Center for the Middle Market, 38% of middle market firms expect to engage in an M&A transaction over the next twelve months, motivated in large part by a desire to add new markets and customers.   Additionally, there is an expectation that increased revenues will be generated outside the U.S., with Canada identified as one of the top three contributing markets[2].

    A healthy U.S. middle market with an appetite for growth through outbound M&A is likely to impact our Canadian deal activity, particularly when we layer on the discount attributed to Canadian company valuations relative to their U.S. counterparts.

    So now that we’ve established why we care, let’s discuss U.S. Middle Market Q2 performance, which comes on the heels of a record setting first quarter. 

    Please click "Open in Browser" to read our full article.

     

    [1] As defined by the National Center for the Middle Market

    [2] In a recent (post-election) Deloitte’s survey of U.S. middle market companies, more than half of respondents reported this expectation.

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