Canadian merger and acquisition (M&A) activity fell for a second year in a row, according to an analysis by KPMG Corporate Finance.
Based on Thomson Reuters data, there were 2,110 completed M&A deals involving Canadian companies in 2009, a 4% decline from the total number of deals in 2008. The total value of M&A deals fell 20% to approximately US$129 billion.
Tight debt capital markets and uncertain economic conditions in the first half of 2009 contributed to the decline in the number and value of deals. Private equity-sponsored deals declined significantly with the total value of deals falling 92% to US$3.2 billion.
While the M&A boom of 2007 was more likely the result of corporate expansion, M&A deals last year involved more distressed companies and businesses looking to realize synergies because of the challenging investment and economic environment.
Sectorally, the mining sector accounted for approximately one-third of all Canadian M&A deals, with a total value of US$9.2 billion. Oil and gas accounted for approximately 14% of the total number of deals, but contributed more than half of the total value of deals last year.
With private equity eager to invest its capital and increasing interest from Asian investors, the M&A market is expected to recover in 2010.