(Edits quote in paragraph 4 for clarity, adds global M&A tally
in paragraph 6 and top Canadian deals in paragraph 13)
By Maiya Keidan
TORONTO, April 6 (Reuters) – Canadian dealmakers are
optimistic about a return to strength in the second half of the
year after mergers and acquisitions in the first quarter dropped
to pandemic levels, belayed by higher borrowing costs and panic
around a banking crisis.
The collapse of regional banks Silicon Valley Bank and
Signature Bank in the U.S. tightened credit markets, making
funding difficult for deals.
As the banking crisis abates and many global central banks
move to the sidelines to assess the impact of rapid interest
rates hikes, bankers are, however, betting that appetite for
dealmaking will return.
“We expect the second half of the year really to be where
stability hopefully comes back or some kind of certainty with
respect to path forward and for M&A to return,” said Sean Rowe,
national deals markets and value creation leader at PwC Canada.
Canadian M&A volumes totalled $34.7 billion in the first
quarter, down 52.3% from a year ago, with dealmaking off to the
worst start since the same period in 2020.
Global M&A volumes during the first quarter slumped 48% to
$575.1 billion as of March 30, compared with $1.1 trillion
during the same period last year, according to data from
Dealogic.
After eight successive interest rate hikes, the Bank of
Canada paused raising rates, while the U.S. Federal Reserve
raised interest rates minimally, by a quarter of a percentage
point, in March and indicated it was on the verge of pausing
further rate hikes.
Sarfraz Visram, head of Canadian and international mergers
and acquisitions at the Bank of Montreal, said having some
certainty around where interest rates would settle helps
dealmaking. He added that sellers need to reset their
expectation on valuation – something that has not happened just
yet.
“Price expectations are, I’d say, 50-70% higher than where I
think they should be.”
Some market participants noted the second quarter is already
off to a stronger start, with the mining sector gathering
momentum.
Copper miner Teck Resources
Plc’s
after Lundin Mining Corp
Caserones for $950 million last month.
Of the deals announced in the first quarter, RBC Capital
Markets, Bank of America Corp’s BofA Securities Inc and JP
Morgan took the top three spots in the advisory rankings.
Energy-focused deals led Canadian activity in the first
quarter, including Alimentation Couche-Tard’s
billion bid for European gas stations from TotalEnergies
Corporate debt in Canada also fell 8.9% in the first
quarter, hitting C$17.1 billion ($12.7 billion) from a year ago,
the lowest first quarter since 2020.
Abeed Ramji, head of Canadian Debt Capital Markets at TD,
said the lack of issuance from banks impacted the corporate debt
market, adding that global markets had become more expensive for
financing.
($1 = 1.3462 Canadian dollars)
(Reporting by Maiya Keidan
Editing by Marguerita Choy)
((Maiya.Keidan@thomsonreuters.com; 44 207 542 1594; Reuters
Messaging: maiya.keidan.thomsonreuters.com@reuters.net))
Keywords: CANADA DEALS/ (UPDATE 1)
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