According to a recently published PwC report (the Report), Canadian mergers and acquisitions (M&A) activity is booming.

We recently reported that Canadian-backed equity financing activity in emerging venture capital companies is thriving. Moreover, both funding and deal volume among Canadian artificial intelligence companies have attained record heights in 2017. However, Canadian companies more broadly appear to be enjoying a particularly prosperous year as well. This momentum in the markets translates to good news for M&A activity in Canada, which is expected to pick up further steam in 2018.

Canadian M&A: by the numbers

The first three quarters in 2017 has seen significant gains in deal volume in Canada virtually across the board, but especially in the low-cap segment. According to the Report, total Canadian M&A activity between Q1 – Q3 in 2017 has reached 843 reported deals. This is up by approximately 42% when compared to total deals over the same period in 2016 (595).

The Report breaks down M&A activity into seven separate segments:

  • $1 million – $20 million: Deal volume is up 62%. 499 deals were announced in Q1 – Q3 2017 as compared to 308 over the same period in 2016.
  • $20 million – $50 million: Deal volume is up 15%. 101 deals were announced in Q1 – Q3 2017 as compared to 116 over the same period in 2016.
  • $50 million – $100 million: Deal volume is up 9%. 49 deals were announced in Q1 – Q3 2017 as compared to 45 over the same period in 2016.
  • $100 million – $500 million: Deal volume is up 48%. 130 deals were announced in Q1 – Q3 2017 as compared to 88 over the same period in 2016.
  • $500 million – $1 billion: Deal volume is up 13%. 26 deals were announced in Q1 – Q3 2017 as compared to 23 over the same period in 2016.
  • $1 billion – $5 billion: Deal volume is down 22%. 18 deals were announced in Q1 – Q3 2017 as compared to 23 over the same period in 2016.
  • $5 billion+: Deal volume is down 29%. 5 deals were announced in Q1 – Q3 2017 as compared to 7 over the same period in 2016.

Outside of deals valued at over $1 billion dollars, the number of deals is significantly higher this year as compared to 2016, in each segment. Moreover, the increase in the number of deals valued between $1 million and $20 million is particularly striking and suggests that low-cap activity is enjoying a banner year.

Canadian M&A: outlook

A widespread uptick in the worldwide markets is expected to continue. BusinessWire recently reported that the Intralinks Deal Flow Predictor (a predictor of future M&A announcements) forecasts the number of worldwide announced M&A deals in Q1 2018 to increase by approximately 2 percent when compared to Q1 2017. This has largely been attributed to a coalescence of four critical factors: gradual pickup in global economic growth; subdued inflation in both advanced and emerging economies; buoyant asset markets; and low interest rates.

The Intralinks Deal Flow Predictor's regional prediction for M&A activity over the next six months in North America points to supportive financial conditions and a booming U.S. equity market but warns that uncertainty surrounding NAFTA negotiations and/or increasing cost of money, as interest rates rise, may detract from M&A activity in the future in the form of reduced deal-making sentiment.

The author would like to thank Peter Valente, Articling Student, for his assistance in preparing this legal update.

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