Despite economic woes in the U.S., Canadian firms are making merger and acquisition history in 2011 by acquiring more companies south of the border than vice versa, according to a PwC report released this morning.
Canadian deals in the U.S. outweigh American deals here by a ratio of 1.5 to 1, the report found. The deal value of Canadian acquisitions in the U.S. is also higher than American dealings north of the border, by a ratio of 1.16 to 1.
“It certainly indicates that Canadian companies continue to be acquisitive, we continue to take advantage of not only a more stable economy but also a strong dollar,” Kristian Knibutat.
“When you’ve got a market that’s more depressed, not performing as well, [Canadian companies are] looking for buying opportunities that are there.”
Knibutat added Canadian deal activity in the U.S. indicates that Canadian companies believe the U.S. economy will recover.
“If you really felt strongly that that wasn’t going to be the case, you’d probably be a little more hesitant to do the deals and pay that kind of a premium,” he said.
As of November 14, PwC found that Canadian entities had been involved in 385 U.S. acquisitions worth more than US$22 billion.
PwC found that for middle-market deals (US$100 million to $US500 million), acquisitions have risen steadily since 2005 and are on track to be triple what they were five years back.
According to Knibutat, reasons driving Canadian deals in the U.S. include:
- a perception that the U.S. is still a safe haven, compared with Europe and emerging countries;
- access to cheap deal capital that can be used to boost returns;
- a larger scale and broader scope of merger and acquisition opportunities; and
- a desire to replace public market exposure with private market exposure.
Jenny Wagler
@JennyWagler_BIV