Market volatility hasn't stopped B.C. companies from making big deals.
Thus far in 2012, more than $11.7 billion in mergers and acquisitions involving B.C. companies have been announced, according to Business in Vancouver research. That's higher than the estimated $11.5 billion worth of deals during the same period in 2011.
While the bulk of the largest deals involve mining companies, the persistent market volatility and concerns of a Greek tragedy in the Eurozone hasn't stopped deals from happening in other sectors as well.
At least 10 significant B.C. M&A deals have been in the tech sector, including:
- Telus' (TSX:T) acquisition of Wolf Medical Systems in February;
- Ritchie Bros. Auctioneers' (TSX:RBA) $64 million purchase of AssetNation;
- Angiotech's sale of its Quill technology to Ethicon for $62 million; and
- OMERS Venture's $20 million investment in HootSuite.
Other significant deals this year include:
- Lions Gate Entertainment's (NYE:LGF) $412.5 million purchase of Summit Entertainment;
- Corix's purchase of Illinois-based water and wastewater company Utilities Inc.; and
- Shoppers Drug Mart's (TSX:SC) $75 million merger plans with Paragon Pharmacies (TSXV:PGN) announced May 22.
At least a dozen deals were announced in May following a similar number in April. That compares with roughly 15 announced in January and February combined.
The deal flow substantiates surveys this year that suggest Canadian companies are eager to grow through acquisition. Ernst and Young's Canadian Capital Confidence Barometer found that 48% of Canadian executives expect to pursue an acquisition over the next year, up from 32% of survey respondents a year ago.
It also found that Canadian executives are far more eager to do a deal than counterparts in other regions of the world. Only a third of U.S. executives and 31% of executives globally are planning to expand through acquisition.
"We're in a unique spot in the Canadian landscape," said Elise Rees, leader of Ernst and Young's transactions advisory practice. "The barometer shows that our CEOs feel confident they can weather the short-term volatility. We've got a strong Canadian dollar, so this is an opportunity for companies with strong balance sheets to look for global and local growth."
The survey found executives have become far more confident about key economic drivers since October. Nearly 60% believe corporate earnings are improving, up from 30% in October. Almost half of respondents (45%) are confident about Canadian economic growth and roughly a third are confident about employment growth and credit availability over the next 12 months, up from 11% and 13%, respectively, in October.
Executives are increasingly concerned about market volatility, but Rees said strong companies have learned to manage it.
"There's confidence, but not overconfidence. And that's a big point," said Rees. "People are making valid business decisions and taking their time about it. It's not like the swell of the mid-2000s when private equity was buying left, right and centre, and there was a tsunami of deals." •
Biggest B.C. M&A deals thus far in 2012
$2.87b: GKHM International's acquisition of Quadra FNX Mining
$2.5b: Eldorado Gold's acquisition of European Goldfields
$1.5b: Pan American Silver's acquisition of Minefinders
$1.2b: First Quantum Minerals' sale of Congolese assets
$922m: Aluminum Corp. of China's plan to acquire 60% of SouthGobi Resources
