2010 Canadian M&A at five-year high; 2011 a perfect storm: PwC

Jan 21, 2011 | Corporate Member News

A total of 3001 Canadian deals worth $155 billion were tracked during 2010, according to a report by PwC. Annual volumes rose by 30% and closed at a five-year high, and annual dollar volumes posted a 65% gain, which was impressive, but still well below the 2007 peak. Gains outpaced the global trend, where the number and dollar volume of deals were both 25% higher than the prior year, the report indicates. 

The outlook for 2011 is even brighter, says PwC. Companies and funds will be motivated to acquire due to trillions of dollars in underutilized capital sitting on balance sheets, improved access to deal financing and slow organic growth prospects.  Further, multiple expansion and competitive tensions stemming from strong deal demand are likely to entice sellers back into the market, creating more equilibrium between buyers and sellers than was observed during 2010. According to PwC’s perspective as outlined in the report, Canada is likely to continue to outpace the global trend due to a well-capitalized financial system, a strong dollar and leadership in hot deal sectors.


Corporates continued to dominate. Canadian activity in 2010 represented 92% of transaction volumes.  When active, most PEs were focused on divestitures, rather than new investments: 66% of PE deals were exits—well off of the sub-30% proportions observed at the height of the M&A boom. The report highlights an exception to this trend, which is that a select group of Canadian financial buyers were extremely acquisitive: CPPIB, Onex, Teachers Pension Plan and OMERS acquisitions represented 70% of all 2010 PE dollar volumes, with CPPIB and ONEX taking honours for the biggest global private equity acquisition of the year ($4.4 billion LBO of Tomkins).

An expansion in EBITDA multiples. This helped to propel average annual Canadian deal value up by 27% to $93 million. In the Canadian private market, deals were completed at approximately 3.5 turns less than the North American disclosed EBITDA multiple range (7.5x – 10x).  “Our observations suggest that typical multiples for Canadian private firms in 2010 were between 4.5x – 6.5x EBITDA,” says Kristian Knibutat, PwC’s National Deals Leader.

A record number of Chinese acquisitions in Canada last year. This was achieved despite some expressed concern in regard to bids from state-owned Asian entities. Further, PwC analysis reveals that more Canadians acquired foreign entities in 2010 than vice versa (77% versus 23%), a trend that is consistent with historic precedent.  “The hollowing out debate was one of the most heated business issues of the year.  While we recognize that certain assets in Canada are highly strategic, on the whole our experience suggests M&A has contributed to the growth—not the demise—of corporate Canada,” says Knibutat.

Not surprisingly, the report shows the energy, materials and financial sectors represented 61% of Canadian activity.


The report states that we are in a perfect storm that should yield an outstanding year of deal making. Global public companies currently have more than $3 trillion in cash reserves, with private equity firms holding another $500 billion. In addition to surplus cash, most entities have access to trillions of dollars in debt financing that is available at low rates and favourable terms.  “Organic growth prospects within North America remain limited, so for many well capitalized corporates and funds, M&A may be the best and only tool for growth,” says Knibutat.

PwC’s key expectations for the year include:

Deal capital will be plentiful to a broader range of credits and usher in a return of private equity buyers. Canadian entities, both private and public, will have more access to deal financing through 2011 via traditional and leveraged loans, as well as public debt markets. Further growth in Canada’s emerging high yield debt market, in particular, will mean public debt markets are more accessible to a broader range of credits. 

Canadian companies will look past North America and do more deals in emerging markets. While Canadians have not traditionally looked past the U.S. border, 2010 saw major Canadian “buys” in nearly every continent. According to Knibutat, “During the fourth quarter of 2010, we noted leading Canadian corporates reaching into new geographies including the Middle East, Asia and Africa. These transformational deals are beacons for what will become the norm for Canadian deal making going forward.”

Joint venture and minority position deals will become more popular. In an era of increased cross border activity and heightened regulatory oversight of takeovers, we expect joint venture and minority position deals will increase in favour, as they permit buyers to “fly under the radar” as well as minimize the economic and/or political risks associated with a deal. Minority acquisitions also permit buyers interested in takeovers to establish a toehold position to acquire a controlling interest at a future date.

More diversified sector growth. Energy and mining deal making will continue at a breakneck pace through 2011. A heightened pace of Canadian activity is expected for the healthcare, infrastructure, agribusiness and banking sectors.

“The conditions are certainly ideal for a blockbuster year of deals, however we continue to caution that key macro risks do threaten the trajectory of the global recovery.  Knowing this, companies and funds should approach deals with a long-term perspective, rather than get swept up in the short-term storm,” says Knibutat.

The full report (http://www.pwc.com/ca/QuarterlyDeals) including graphs and detailed analysis, is also available from the media contacts.

M&A statistics often vary by data provider or analyst.   Our methodology for M&A analysis is set out as follows:

  • A “Canadian transaction” is defined as any announced merger or acquisition deal in which at least one Canadian is involved, as buyer or seller.  (less than 100% acquisitions / divestitures are included in statistics).
  • Canadian Private Equity” deals are defined as merger or acquisitions deals involving at least one Canadian entity and at least one private equity firm (data is not limited to Canadian private equity firm activity alone).
  • A “Canadian” entity is defined as an entity headquartered in Canada.  In special instances, we make exceptions to this rule. For example, in December 2010, TD Bank North America, headquartered in the US, acquired Chrysler Financial for over $6 billion.  Despite the fact that TD Bank North America is headquartered in the US, we view this deal as “Canadian” in substance.
  • Where possible, cancelled, dismissed or withdrawn deals are excluded from data.  Deals can, however, be cancelled post publication.
  • The main source of our data is Capital IQ.   Capital IQ includes real estate and property deals in its M&A data, a differentiating feature from some other commonly utilized M&A databases.
  • We do not include private placements in our statistics.
  • Deal currency is US$, historical rate, unless otherwise noted.
  • Transaction value refers to total consideration to shareholders, calculated as:

Total Consideration to Shareholders

+ plus Total Other Consideration

+ Total Earn-outs

+Total Rights/Warrants/Options

+ Net Assumed Liabilities

+ Adjustment Size

+ Total Cash

+ Short-term Investments

About PwC’s Deal Team
PwC’s Deal Team (www.pwc.com/ca/deals) helps clients to achieve deal success—from concept to close and beyond. As part of the world’s largest Transaction Advisory practice1, and with our global Corporate Finance group being 2010 Upper Mid Market M&A Advisor of the Year2, the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.

Firm Description
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See http://www.pwc.com/ for more information. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,300 partners and staff in offices across the country.

“PwC” is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.

PwC Name Change
PwC has changed its name from PricewaterhouseCoopers to PwC in the fall of 2010. ‘PwC’ is written in text with a capital ‘P’ and capital ‘C’. Only when you use the PwC logo is the name represented in lower case.

1 Source: Kennedy; “Business Advisory Services Marketplace 2009-2011” ©BNA Subsidiaries, LLC. Reproduced under license.
2 Source: Acquisitions Monthly Awards 2010 

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

For further information:

David Rowney, PwC
Tel: 416 365 8858
email: [email protected] 
Kiran Chauhan, PwC
Tel: 416 947 8983
email: [email protected] 

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