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This has been a busy year for Brian Pukier, a partner with law firm Stikeman Elliott LLP and head of its Toronto mergers and acquisitions group. After a slow summer last year, the M&A space is finally back to normal, he says. “We’d always like more deals, but our firm is keeping busy,” he says.
Mr. Pukier’s firm does a lot of work in the resource space; he’s seen a lot of deals done in mining, energy and oil and gas, in particular. He points to high commodity prices, demand from Asia and higher overall confidence in the economy as reasons for the increase.
M&As won’t return to 2006-2007 levels, when everyone was making deals, he says, but the rest of the year will only get better. “As long as banks are lending, which they are, then I think we’re going to stay at least consistent,” he says.
While this country’s M&A market is doing nicely, the same can’t be said for the rest of the world. Global M&A activity last quarter was down 23 per cent year-over-year, according to Dealogic, a London, U.K.-based company that helps banks analyze capital markets. While volume reached $574.2-billion, it was the lowest quarterly figure since the third quarter of 2009 and the slowest start to the year since 2004.
Around the world, the oil and gas sector, followed by the mining sector, were the two busiest industries – the mining sector hit a quarterly record with $71.4-billion worth of deals. Because resources make up a large portion of Canada’s market, it’s easy to see why Mr. Pukier hasn’t noticed a slowdown.
In fact, Canada was one of the few countries that Dealogic tracked in which the value of M&A deals increased. While the number of deals fell by 10 per cent year-over-year in the first quarter, the value of those transactions rose to $44.7-billion from $26.7-billion.
Norman Raschkowan, executive vice-president of investments for Mackenzie Financial Corp., also thinks there will be more activity – in Canada and globally – in coming months. Corporate managers, he says, are feeling better about the economy. “That makes it easier for them to go ahead with acquisitions,” he explains.
Around this time last year, people were worrying about a Greece default and a double-dip recession. But with better employment numbers in the United States, improving housing data and fewer worries about a European meltdown, the double dip fears have mostly subsided, he says.
It also helps that the U.S. Federal Reserve has committed to keeping interest rates low until 2014. Bottom-basement rates make it less desirable for companies to keep their dollars, which they’ve been amassing, in cash. “A lot of companies have a lot of money,” says Mr. Raschkowan. They can either grow through acquisition or, he says, “leave their assets in cash and have it yielding nothing.”
Adley Bowden, director of research for Seattle-based PitchBook Data Inc., a company that tracks private equity and venture capital deals, also thinks we’ll see more M&A activity in the coming months, especially from the private equity sector.
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