Canadian M&A jumps 28% in third quarter, market volatility could slow deals

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TORONTO, Oct 7 (Businesshala) – Canada’s third-quarter mergers and acquisitions activity jumped to its highest level since 2016 as historically low interest rates and strong equity markets helped companies revive transactions that have been on the rise. were stopped due to the pandemic.

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Dealmaking rose 27.7% to $76.6 billion in the third quarter of the year, but was well below the record $120.3 billion recorded in the first three months of the year, according to Refinitiv data.

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Bankers said that while factors mitigating M&A are in place and the pipeline is strong, equity market volatility could slow down the pace of deals.

Jake Lawrence, Group Head and CEO, Global Banking & Markets, said, “High deal flow in Q3 was driven by a combination of factors including strong equity markets, historically low borrowing costs and market confidence in a gradual COVID-19 recovery ” Scotiabank.

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However, he added that short-term inflation and supply chain concerns are unlikely to have a material impact on deal flows, given investors’ focus on long-term strategic considerations.

Transportation and infrastructure-focused deals led the activity in the third quarter, including $33.6 billion in M&A activity, including Brookfield Asset Management’s $9.57 billion ($6.95 billion) bid for Australia’s Oceannet Services and Brookfield Key includes the planned acquisition of Dexco Global Inc. for $3.4 billion.

High inflation in Canada and the United States has raised concerns about central banks dialing back pandemic-era liquidity support and the prospect of higher interest rates. This has increased volatility in the stock market.

“I think the bigger threat to the M&A landscape is the threat of rising interest rates,” said Sarfaraz Visram, head of Canadian and international mergers and acquisitions at Bank of Montreal.

“It’s very easy to do M&A when everyone is enjoying a strong equity market, but I would say that valuations were getting too high… deals at extreme multiples were hard to justify,” he said. They said.

Of the deals announced in the first nine months of 2021, Bank of America Corp’s BofA Securities Inc., Bank of Montreal’s BMO Capital Markets and Toronto Dominion Bank’s TD Securities Inc took the top three spots in the advisory rankings.

Despite strong stock markets, equity offerings fell for the second quarter in a row, nearly halving in the third quarter to C$6.8 billion ($5.42 billion) from the previous quarter, while IPOs fell by nearly a tenth in the third quarter to C$332 million. last three months. ($1 = 1.2549 Canadian dollars) (Reporting by Maia Keidan Editing by Marguerita Choy)

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