Canadian mergers and acquisitions slipped in the first half of 2016, with sluggish activity in natural resource sectors offsetting some large infrastructure deals, according to Thomson Reuters data released on Thursday.
Goldman Sachs (GS.N) topped the league tables, Barclays Plc (BARC.L) ranked second, and Lazard was third, followed by Morgan Stanley (MS.N), Wells Fargo (WFC.N) and J.P. Morgan Securities Canada.
CIBC, Scotiabank and RBC were the strongest performing domestic banks. RBC also advised on the highest number of deals.
Deal volume fell to US$108.2 billion from US$137.9 billion a year ago, the data showed.
The biggest transactions were TransCanada‘s (TRP.TO) US$10.2 billion acquisition of Columbia Pipeline Group, and Fortis Inc‘s (FTS.TO) proposed $US11.3 billion purchase of ITC Holdings Corp.
While energy and other resource companies started taking advantage of firmer commodity prices to raise equity, they have been cautious on acquisitions.
Cross-border deals were fueled by both outbound and inbound acquisitions.
“The most significant trend is the continued increase in cross-border activity by pension funds, asset managers like Brookfield and selected strategic operators,” said Bruce Rothney, chief executive of Barclays Canada, which advised ITC on the Fortis deal.
“Because of their long-term focus and longer duration liabilities, they continue to aggressively pursue alternative investment categories,” he said.
Rothney expects further consolidation in the power sector, with Emera (EMA.TO), Fortis and Hydro One (H.TO) likely to be active deal-makers.
Energy deals have largely been asset sales from struggling producers looking to strengthen balance sheets and, in some cases, simply survive.
Last month, Penn West Petroleum (PWT.TO) agreed to sell its Saskatchewan assets to Teine Energy Ltd for $975 million (US$749.19 million) in an a bid to avoid a default.
“The oil-and-gas asset market has improved. That’s driven some of the financings,” said Derek Neldner, head of Canadian investment banking at RBC, which advised Penn West on its sale.
“The cross-border trend is up quite significantly,” he added. “It’s partly a function of a weak Canadian dollar that has made Canadian businesses more attractive to foreign buyers.”
Investors remained cautious about Britain’s vote on June 23 to leave the European Union.
“The full effect of Brexit remains to be seen,” said Alan Klein, co-head of Simpson Thacher & Bartlett‘s M&A practice. “Deals that make strong strategic sense will continue to move forward in the second half of the year.”
Among law firms, Simpson Thacher was the lead M&A advisor, followed by Osler Hoskin & Harcourt and Blake Cassels & Graydon.
(Reporting by John Tilak; Editing by Richard Chang)
Photo courtesy of Reuters/David Gray