Canada Energy Mergers Slump in Value Terms

A slowdown in big energy deals has pushed the value of mergers in Canada lower for the first time since 2013, offsetting a decade-high resurgence in domestic transactions.

Canadian firms were involved in $243.5 billion worth of mergers and acquisitions through Dec. 26, down 11% from $272.3 billion in 2016. The drop was largely due to a 25% decline in energy deals, Bloomberg reported.

The trend in recent years of Canadian firms buying abroad abated in 2017, falling to about $122.3 billion, from a record $176 billion last year. That was still above the average of the previous five years of about $72 billion. The number of large deals in excess of $5 billion fell to seven, from nine in 2016.

“It is just hard to see this level of elevated, cross-border big deals happening at the same pace that it has over the past three years,” said David Rawlings, Canada senior country officer for JPMorgan Chase & Co. “I do expect a little more normalization and I do think activity will be lower in 2018 versus 2017.”

The number of Canadian companies capable of doing these large global deals is limited, and many are still in the middle of digesting transactions from the past few years, he said.

At the same time, the domestic Canada market does not offer the same size of takeover targets as the US and elsewhere, he added.

JPMorgan was the top financial adviser for deals involving Canadian firms, participating in $65.4 billion worth of transactions through Dec. 26. Barclays Plc was second, advising on $46.7 billion, followed by Toronto-Dominion Bank, at $43.1 billion.

Goldman Sachs Group Inc. came fourth, working on $39.9 billion worth of transactions and Royal Bank of Canada was next at $38.6 billion. The numbers may change as new deals are announced.