KPMG Projects Strong Canadian M&A Market to Continue in 2015

Canadian M&A activity surged to a three-year, total transaction value high of $157 billion in 2014, with KPMG forecasting this trend to continue through 2015.
 
While the number of acquisitions decreased by 0.6 per cent compared to 2013, total value increased 20.9 per cent over the past year as larger transactions were completed, according to KPMG analysis of data supplied by Thomson Reuters.
 
Energy and Power retained the top spot on the total transaction list, with acquisitions totaling of $49 billion, more than the next two industries (Consumer Staples and Real Estate) combined. Consumer Staples, buoyed by Burger King Worldwide's $13 billion acquisition of Tim Horton's Inc. surged into second spot with total transactions valued at $21 billion, up from its ninth place finish in 2013.
 
The overall trend of rising M&A activity is also supported by a recent KPMG in the US survey of over 700 M&A professionals which included corporations, private equity funds and investment banks. The survey found that 82 per cent of respondents are planning to make at least one acquisition in 2015, even higher than 2013 and 2014. This trend is expected to translate into the Canadian M&A market over the next twelve months.
 
2015 M&A Market Predictions:
 
Larger transactions ensure the Canadian M&A market continues its resurgence resulting in a higher total annual transaction value through 2015.
A weaker Canadian dollar means greater purchasing power for international buyers of Canadian companies. The decline in the exchange rate will also encourage Canadian companies to renew their focus on domestic transactions as sectors such as manufacturing enjoy the benefits of a lower dollar and strong US economy.
Energy and Power, Real Estate, Materials and Retail remain key to M&A activity in 2015.
With oil prices hitting a 10 year low, natural resource companies are examining their cost structure and restructuring options to adapt. This could be a catalyst for more mergers in the oil patch as companies seek to lower their production costs.
The potential for increased consumer spending coupled with the positive impact on motorists and the auto industry due to continued low oil prices will result in interesting sector dynamics. Ontario's auto industry could be a big benefactor in 2015 from these market conditions.
Companies will be increasingly selective in their acquisitions and remain willing to pay a premium for a target that fits their investment criteria.
M&A drivers this year include the continued return of M&A as a growth strategy among strategic acquirers, combined with the low cost of debt capital and large cash balances on companies' balance sheets.
Top Five Transactions of 2014:
 
Burger King Worldwide's acquisition of Tim Horton's Inc. for $13 billion
Loblaws Companies Limited's acquisition of Shoppers Drug Mart Corporation for $12 billion
Encana Corporation's acquisition of Athlon Energy Inc. for $7 billion
Amaya Gaming Group's acquisition of Oldford Group Ltd. for $5 billion
UNS Energy Corporation's acquisition of Fortis Inc. for $5 billion
Key Statistics:
Total Number of Transactions:
 
2013: 1,766
2014: 1,755
Total Value of Transactions:
 
2013: $129 billion
2014: $157 billion
QUOTES
 
"We continue to see strong M&A activity in Canada and a move towards larger, higher value deals. Through 2015, we expect this trend will continue as robust debt capital markets and a recovering US economy is expected to have a positive impact on Canadian activity."
 
– Peter Hatges, President, KPMG Corporate Finance Inc.
 
 "As low oil prices persist and weakness in the Canadian dollar continues, we see Canadian companies looking more heavily at domestic M&A opportunities. We also forecast the increased use of acquisitions as a key element of growth strategies and expect companies to exhibit willingness to pay high values for deals that match their investment needs.''
 
– Patrick Ghoche, Managing Director, Quebec Corporate Finance, KPMG Corporate Finance Inc.

on January 16, 2015