M&A activity continues record pace

Canadian mergers and acquisitions activity continued at a torrid pace in the third quarter, boosted by a flurry of cross-border mega-deals, according to the latest report from investment bankers Crosbie & Company Inc.

“We are in a white-hot M&A market that is broadly based and would appear to have very strong legs going into the fourth quarter,” said Colin Walker, managing director at Crosbie & Company. “It is proving to be an ideal time to sell businesses, and on very favourable terms.”

Four hundred and twenty transactions were announced in the third quarter, representing a total value of $90.3 billion.

The report credits the strong economy and availability of capital as leading catalysts for the surge in deal-making. So far this year, the M&A market has been dominated by deals in the base metals, energy, industrial products, real estate and merchandising sectors.

On a year-to-date basis, there have been 1,430 transactions announced, with a total value of $187 billion. That marks an increase of 32% in the number of deals, and a 64% boost in total value.

There were 18 so-called “mega-deals” — those valued in excess of $1 billion — in the quarter, with a total value of $69.8 billion. That’s up from 10 deals totalling $45.2 billion in the second quarter. Year-to-date, there have been 40 mega-deals valued at more than $151 billion.

The August takeover of Inco by Brazil’s CVRD was easily the largest transaction, worth more than $19.8 billion. The second largest deal was valued at about half that, as Goldcorp offered $8.7 billion US for Glamis Gold.

Not all of the big deals were in the resource sector, as U.S.-based Advanced Micro Devices inked a deal to buy ATI Technologies for $5.4 billion US.

Such cross border transactions have formed a base for the industry, accounting for 80% of total deal value and 35% of total deal volume during the first nine months of 2006. Despite the high profile of foreign takeovers, Canadian firms are more often the buyers, having acquired 363 foreign firms year to date, compared to 138 foreign takeovers of Canadian companies.

Another trend is the increasing role of private equity firms buying up assets, although this front was relatively quiet in the third quarter, with just one mega-deal — Fortress Investment Group’s $3.1-billion purchase of Intrawest Corporation.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com