2012 M&A deal volumes hit post-crisis high: PwC

Despite a 9.6% decline in deal volumes last year, the total value of announced deals rose.

It climbed 10.5% to reach its highest level since the market peak in 2007, says the PwC’s latest report, entitled 2012 Year in Review: Q4 Deals Quarterly and 2013 Outlook.

The report adds there were 2,811 announced transactions worth $210 billion in 2012.

“The key driver behind this growth has been a resurgence of activity in deals valued at over $1 billion,” commented Nicolas Marcoux, Canadian deals leader at PwC.

Read: Canadian M&As defy gravity in 2012

He adds, “These mega-deals accounted for $123 billion in 2012, an increase of some $30 billion over 2011, which compensated a modest decrease in the aggregate value of sub-$1 billion M&A activity.”

The resource industries and the real estate sector dominated in 2012, with the energy sector regaining the title of the top targeted industry in Canadian mergers and acquisitions—it accounted for 29% of published transaction values.

Read: Energy stocks powered by global demand

In addition to the Nexen and Progress Energy deals, other purchases that led the industry to the top were the acquisition of Celtic Exploration by Exxon Mobile affiliates, along with a joint venture agreement between Encana Corp. And PetroChina.

The real estate sector represented 15% of target activity in Canada. “With real yields on treasuries at or below zero, investors are scrambling to find other classes of yield assets and real estate M&A is a clear beneficiary of this,” says Marcoux.

And rounding out a top three finish was the metals & mining sector, which represented 11% by value of Canadian M&A target activity. The announced takeover by First Quantum Minerals of Inmet Mining was the key buy behind the jump in the value.

Looking forward, Marcoux sees good prospects for sustained growth in the Canadian M&A market. This will be driven by low interest rates, as well as a surplus of cash on corporate balance sheets and in the hands of pension and private equity funds.

Read: 5 M&A trends to watch for in 2013

The report also forecasts:

• the return of the mega deal – More mega deals were announced in 2012 than at any other time in the past five years.
• Canadian investors buying globally – The value of outbound M&As in 2012 saw its fourth consecutive year of growth and reached a post-crisis high.
• inbound M&A- Foreign acquisitions of Canadian targets accounted for 27% of total M&A activity in 2012.

Read: Follow growth beyond borders