Canada M&A units file for quarter on cross-border offers, simple cash

By Maiya Keidan

TORONTO, April 7 (Reuters). Canadian M&A activity in the first three months of the year catapulted to all-time highs as dealmaking recovered from the effects of the coronavirus and bankers point to a healthy pipeline of transactions based on easy funding terms.

The novel coronavirus drove mergers and acquisitions (M&A) to a nine-year low in 2020 when companies switched to cash-on-hold. However, the introduction of vaccines and an expected economic recovery are boosting business confidence to close deals, particularly in the US.

“These are definitely the busiest times I’ve seen in my 25-year career,” said Grant McGlaughlin, partner at Fasken law firm. “I don’t think you can hold out at this pace all year, but hopefully Q2 and Q3.”

The quarterly M&A balance sheet hit an all-time high of $ 114.91 billion in the first quarter of 2021, according to Refinitiv. Companies raised $ 19 billion ($ 15.2 billion) through stock sales in the first three months of the year, the highest since the fourth quarter of 2010.

Mike Boyd, managing director and head of global mergers and acquisitions at CIBC, said he doesn’t think he has ever seen capital markets as conducive to mergers and acquisitions as it is now.

“If you look at the debt markets in particular, you have a record low in interest rates and we also have … strength in market capacity” to absorb the size of the deal, he said.

Boyd expects M&A activity to remain high thanks to low interest rates and a strong economic recovery that will continue for at least the next few quarters.

OUTBOUND RUSH

Bank of America Corp.’s BofA Securities Inc, Bank of Montreal’s BMO Capital Markets, and Toronto Dominion Bank’s TD Securities Inc formed the top three banks for mergers and acquisitions.

Canadian Pacific Railway Ltd’s $ 25 billion offer for Kansas City Southern and Rogers Communications Inc’s C 20 billion deal for Shaw Communications Inc topped the list of deals.

The story goes on

Bill Quinn, head of M&A at Toronto Dominion, said while Canadian investors looking outside Canada had declined over the past year due to the pandemic, we are now seeing a “return to normal”.

Outbound deals worth nearly $ 50 billion were made in the first quarter of 2021. This was the second largest quarter on record, with about half coming from the CP transaction.

“In terms of Canadian M&A, we are seeing stronger growth in our market compared to the US,” said Sarfraz Visram, Head of M&A at BMO Capital Markets.

U.S. M&A activity increased 12.2% to $ 869.35 billion in the first quarter of 2021 compared to the fourth quarter of 2020, while Canadian M&A activity grew sequentially at 44.4 during the same period % recorded as refinitive data showed.

“We have now clearly gone around the corner,” said Emmanuel Pressman, partner at the law firm Osler. “It’s partly a renewal of confidence in cross-border M&A flows, both inbound and outbound.”

($ 1 = 1.2536 Canadian dollars) (Reporting by Maiya Keidan Editing by Denny Thomas and Lisa Shumaker)