Credit crunch puts end to merger boom
Mergers and acquisitions were much rarer events in Canada during the first three months of this year as tighter credit conditions hit the takeover market, according to a firm that tracks such deals.
The number of M&A deals in the first quarter fell to a three-year low, said Crosbie & Co. Tuesday. There were 338 transactions worth $24.3 billion — well off the 523 deals valued at $61.5 billion in the first quarter a year ago.
It was the third consecutive drop in both the number and value of quarterly M&A announcements. "Lingering credit concerns and economic uncertainty in the U.S. and Canada continued to weigh on M&A activity in Canada," according to an analysis by Crosbie & Co.
After a three-year-long boom in mergers, analysts said the level of deal-making is reverting to levels seen before 2005.
"Good deals are still getting done," according to Crosbie & Co. managing director Ed Giacomelli, who said the significant drop in deals was expected given the "record level of M&A activity last year and the recent market volatility."
Only seven "mega-deals" were inked in the first quarter (those worth more than $1 billion), versus 12 in the prior quarter and 13 a year ago. The biggest deal in the most recent quarter was the $3.7-billion acquisition of Richmond, B.C.,-based CHC Helicopters by First Reserve Corp. — a U.S. private equity firm.
But Crosbie & Co.'s figures show that Canadian acquisitions of foreign companies (92 deals worth $9.2 billion) still exceeded foreign takeovers of Canadian companies (29 deals worth $6.3 billion) by a wide margin in the quarter.
The final margin will actually be even larger, as Crosbie's figures include the $1.3-billion acquisition of MacDonald Dettwiler's space division by Texas-based Alliant Techsystems, a deal later blocked by the federal government — the first such rejection since the current foreign investment process was set up more than 20 years ago.
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