Mergers, acquisitions down in 2010

The dollar value of Canadian mergers and acquisitions is expected to fall in 2010 from the level in 2009, but will rise in 2011, KPMG said Wednesday. "M&A results for the year 2010 continue to disappoint," the consulting firm said in a news release. KPMG expects that there will be 1,800 deals this year involving Canadian companies as buyers or targets, with a value of between $115 billion and $119 billon, based on data from Thomson Reuters SDC.

Last year, there were 2,110 deals valued at about $130 billion.

However, one deal that was killed by the federal government — the nearly $41-billion takeover of Saskatchewan's PotashCorp by BHP Billiton — would have pushed this year's total above the 2009 level.
Canadian companies were buyers in seven of the 10 biggest deals, and eight of the 10 were in the mining or oil and gas sectors. Kinross Gold Corp.'s acquisition of Red Back Mining for $6.9 billion was the largest Canadian deal of the year.

The pace of deals picked up in the last half of 2010, so the full-year statistics "can be deceiving," said Peter Hatges, president of KPMG corporate finance. That suggests there will be continued growth in deals in the first half of 2011.

The M&A data prepared by Toronto investment banker Crosbie & Co. and the Financial Post newspaper reached the same conclusion, showing a 40 per cent increase in the dollar value of deals in the third quarter, compared with the second.

Mining, materials most active sectors

Hatges said "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," especially late in the year.

The turmoil in European markets presents an opportunity for Canadian companies, strengthened by the strong Canadian dollar, Hatges said.

The Crosbie report noted that pension funds, such as the Canada Pension Plan and the Ontario Teachers' Pension Plan, have been big players in international takeovers.

KPMG said deals in the mining and materials sector were the single bigest group, accounting for more than a third of the total, followed by energy and industrials. The three sectors accounted for more than 60 per cent of 2010 total.

The strength in mining is not surprising, "given strong commodity prices driven by the continued and increasing need for commodities from emerging economies," said Brian Imrie, KPMG's head of mining and metals.The consultants noted the drop in Canadian mergers and acquisitions this year stands in contrast to the booming economies of India and China, where there were increases of 117 per cent and 31 per cent, respectively.

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