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Canadian Mid-Market M&A: Global Context

  • Posted By: Ari Cuperfain

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  • Comments: 0


Globally, M&A activity for transactions in the US$5-500 million range was slower in the first quarter of 2015. The aggregate transaction value reached $163.4 billion in 1Q 2015, down 7.5% from $176.7 billion in 1Q 2014. Annual transaction value increased in 2014 to $794.0 billion, up by 11% from $712.4 billion in 2013. Transaction value for 1Q 2015 was between the first quarter numbers for 1Q 2014 and 1Q 2013, suggesting that annual global transaction value is on pace to be in the $725-775 billion range for 2015.

Canada has historically represented between 3-5% of total global mid-market M&A activity and accounted for 3.14% in 1Q 2015. In fact, Canada’s relative contribution to overall global M&A activity has been below average for the past two quarters. However, Canada remains an active M&A market for a country of its size when viewed within the global context. Over the past five years, Canadian GDP was less than 2.5% of overall global GDP. However, the U.S. M&A market is the most active in the world, even when the size of its economy is taken into account. The U.S. represents roughly 23% of global GDP, but nearly 40% of M&A activity within the $5-500 million value range. This reflects both the fluidity of the economies and liquidity of the capital markets of both Canada and the U.S.

Despite the apparent slowdown in the first quarter, the current economic landscape is conducive towards active M&A markets at all transaction sizes. In the aftermath of the 2009 financial crisis, corporate balance sheets are rife with excess cash. The aggregate cash and cash equivalents reported on the balance sheets of S&P 500 companies reached an all-time high at the end of 2014 of $1,467 billion (most recent data; data collected for 472 companies listed on the S&P 500 from 2005 through 2014). Similarly, private equity firms have accumulated unprecedented amounts of uninvested capital. Most of this capital needs to either be deployed in the near term, or otherwise returned to investors. The magnitude of this ‘dry powder’, combined with accommodative credit markets, should continue to drive deal activity among both private investors and industry consolidators.

Next we will look at Canadian M&A activity in a historical context to explain the current economic situation in the Canadian market. If you found this post interesting, you may want to explore our 2014 Canadian Private Equity Report where we discuss trends in private equity as they pertain to the Canadian market. 

Source: Capital IQ

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