Crosbie & Company Canadian Mergers & Acquisitions Report for Q2 2024

Continued Market Optimism Fuels M&A Activity

In Q2 2024, announced Canadian M&A transactions increased for the second straight quarter, the first two quarter upswing since the pandemic-driven surge in 2021. There were 650 announced transactions in Q2, a 7% rise from the previous quarter though still down 12% year-over-year. Announced deal value was up 79%, totaling $74B, an increase from $41B in the previous period, as a result of several larger cross-border and domestic transactions. 

“Second quarter M&A activity demonstrated positive momentum, as deal psychology improved for both buyers and sellers amid strong capital markets performance, increasing expectations for a soft economic landing and recent rate cuts in Canada,” said Richard Betsalel, Managing Director of Crosbie & Company Inc. “This improving environment for exits along with a moderating interest rate environment could fuel further growth in M&A activity.  Anecdotally, we are seeing this in our M&A practice as business owners are feeling more confident in going to market and capital groups are seeking to realize liquidity for some of their long held portfolio assets.”

Declining inflation, expected interest rate cuts in both Canada and the U.S., and significant private equity dry powder, are providing tailwinds to dealmakers. As always, capital markets volatility, geo-political instability and the looming U.S. election are wildcards that could impact the M&A markets in the second half of the year. 

There were 12 mega-deals (transactions with values above $1B) in the quarter representing a combined value of $60B, of which eight involved Canadian targets and the three largest involved renewable energy or utility companies outside of Canada.  Notable transactions with Canadian targets announced this quarter include National Bank of Canada’s $5.5B acquisition of Canadian Western Bank, Advent International’s $6.8B take-private of Montreal-based fintech Nuvei Corporation, and Birch Hill Equity Partners and Homesteaders Life Company’s $1.3B take-private of funeral home operator Park Lawn Corporation.

The mid-market (represented by transactions with values below $250M) broke free from its three-quarter downward trend as stability returned to this segment of the market. With 262 announced transactions, a 29% increase over the previous quarter, the mid-market represented 91% of deal activity with disclosed values and 9% of total deal value.

From a sector perspective, Metals and Mining was both the most active sector in terms of deal announcements (125) and experienced the largest rebound in activity (+34) after a major slump last quarter.  Other sectors exhibiting strong upticks in transaction volume included Industrials (+15) and Precious Metals (+11).  Sectors that posted volume significant declines included Information Technology (-16), Health Care (-5), and Communication Services (-7), Energy (-8).

Cross-border M&A continued to play a significant role in overall deal activity in Q2 2024, representing 41% of transactions and 49% of deal value. The total number of cross-border transactions remained steady at 267 and overall deal value increased $6.5B. Outbound cross-border M&A saw a significant uptick as Canadian buyers increased their appetite for foreign targets, driving deal value up by 237%, a level not seen in over a year.

Overview

• Deal activity continued its rebound in Q2 2024 with 650 announcements, up 7% from the previous quarter, the first consecutive quarter increase since 2021
• Aggregate deal value saw an 79% increase to $74B, the highest level in a year, driven by multiple cross-border and domestic mega deals
• Cross-border M&A activity remained flat at 267 announced transactions representing $36.5B in value (49% in aggregate deal value)

Mega-Deals 

• There were 12 mega-deals (those over $1B) announced in Q2 2024 representing $60B in value 
• The largest deal by a Canadian buyer was the $11.2B take-private of Neoen S.A. by Brookfield Asset Management’s clean energy arm Brookfield Renewable Corporation 
• 8 mega deals were announced on Canadian soil representing $19B in deal value, including National Bank of Canada’s $5.5B acquisition of Canadian Western Bank

Industry Sector Activity

• Large deal count increases were witnessed in Metals and Mining (+34); Industrials (+15); Precious Metals (+11); Consumer Discretionary (+10); Consumer Staples (+5)
• Deal count decreases were seen in Information Technology (-16); Energy (-8); Consumer Services (-7) Health Care (-5); Real Estate (-2)
• Utilities (8) despite a small number of transactions, represented 44% of total deal value across 4 mega deals

Breakdown by Transaction Size

• Mid-market transactions (those with values below $250M) with disclosed values comprised 91% of the quarterly activity and 9% of quarterly value
• The mid-market quarterly deal value increased by 14% 

Canadian Domiciled versus Foreign M&A Targets

• Acquisitions involving Canadian targets increased 4% to 458 in Q2 2024, in-line with the trailing 8-quarter average (455) 
• Canadian firms made 483 acquisitions in Q2 2024, of which 337 were domestic deals (up 10% from the prior quarter) and 146 were completed abroad (up 8% quarter-over-quarter)

Cross-Border Deals

• Cross-border deals represented 41% of total deal activity and 49% of total value in Q2 2024
• Inbound activity decreased 8% quarter-over-quarter while outbound cross-border activity increased by 8%
• Canada/U.S. cross-border activity remained strong, accounting for 58% of deal activity and 57% of deal value, but decreased as a percentage of total cross-border deal value due to several overseas mega deals

Deals by Provincial Domicile

• Domestic deal activity and aggregate deal value increased moderately quarter-over-quarter
• Ontario experienced the largest decline in transactions (-35) and deal value (-$11B), while the western provinces, British Columbia (+28) and Alberta (+10), saw a collective increase of $3B in deal value
• The Northwest Territories experienced an uncharacteristic surge in deal value, exceeding $1 billion, due to Bell Canada's $1B acquisition of Northwestel Inc