Canada Flexes Its Merger and Acquisition Muscles; Outpaces Global In Q2: PwC Report

Aug 3, 2011 | Corporate Member News

New real estate buying frenzy and continued strength in resources and financial sectors drive growth

A new PwC report found Canadian deal-making was surprising strong amidst a backdrop of confused capital markets and global financial turmoil, especially in the United States and Europe. The second quarter saw 836 Canadian mergers and acquisitions (M&A) announcements worth close to US$57 billion—the strongest deal quarter in Canada since the credit crisis.

  • Canadian deal volumes and aggregate were 6% and 14% higher than Q1 2011 respectively. Volumes were also 10% and aggregate value was 64% higher than Q2 2010.
  • As average debt multiples of North American leverage buy-outs (LBOs) hit a post-crisis high of 5.4x during the second quarter, mega deals (>$1 billion) made a bona fide comeback in Canada.  2011 has seen 16 mega transactions worth US$45 billion, an increase of 33% in volume and 70% in value over 2010.
  • Canada’s middle market (US$100 million – US$1 billion) was the busiest it’s been post-crisis. 71 deals worth US$23 billion were announced during the quarter.

Real estate stands out in Canadian M&A activity

M&A activity in the real estate sector occurred at a rapid pace in Q2 2011, which saw 90 real estate deals worth US$9.7 billion involving at least one Canadian entity. Deals this quarter were largely in developed Europe, Canada and Australia—a departure from last quarter which saw a handful of buys in emerging markets.

Notable deals included Dundee REIT’s announcement to acquire a US$1.09 billion portfolio of 295 commercial properties in Germany and Primaris Retail REIT’s announcement to acquire a US$584 million portfolio of five Canadian shopping centre properties.

The past decade has seen the aggregate annual value of real estate deals increase by 1,119%. In 2000, we only saw US$1.7 billion worth of real estate deals involving a Canadian entity, while the 2010 value tally stood at US$21.6 billion. This year has already seen close to US$15 billion worth of transactions, driven by intense thirst for yield by investors.

Outlook – More cancelled deals and a shift to the West

“Overall, this year has been a perfect storm for the Canadian deal market. However, it’s interesting to note that many of the deals announced in Q2 can be traced to market sentiment last year,” says Kristian Knibutat, PwC’s Canadian deals leader. “Given recent instability, we do expect deal activity to slow down, but we anticipate that Canada will fare better than many of its developed nation peers.”

Some key expectations for the near-term include a wider gap in value expectations that may stall deal-making.

“In light of a fragile recovery, buyers may be reluctant to price deals off of presumed 2012 EBITDA. Conversely, many sellers may be unwilling to entertain deals that don’t take optimistic forward- looking expectations into account,” adds Knibutat.

PwC also expects Canada’s Western provinces to be especially resilient and will likely outperform certain global deal markets, like the US and the UK. Wealth created from the “financialization” of commodities is anticipated to spur growth in the local consumer and energy sectors.

PwC also developed a new structure that takes advantage of a specific exemption that is contained in income trust/SIFT tax legislation.  The “Foreign Asset Investment Trust” structure means that income trusts are still a viable option for foreign assets from which earnings flow to Canada.  We have already advised two companies regarding the employment of this structure and expect that the structure will attract the interest of private equity firms and companies that plan to monetize some, or all of their foreign investments.

The full report can be accessed at:

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at

About PwC’s Deal Team
PwC’s Deal Team ( 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.

Follow PwC on Twitter @PwC_Canada_LLP and on Facebook at

About PwC
The firms of the PwC network provide industry-focused assurance, tax and advisory services to enhance value for clients. More than 161,000 people in 154 countries in PwC firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP, an Ontario limited liability partnership, and its related entities have more than 5,700 partners and staff in offices across the country. See for more information.

“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.

Note to Editors: PwC 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:

Contact                   Jessica Draker
Tel.: 613 755 8706

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