PE deal activity picks up in Canada

Analysis from KPMG’s Corporate Finance group finds that private equity players are becoming more active as Canada’s M&A sector seems poised for a turnaround.

Private equity sponsored M&A activity is on the rise in Canada, following a flurry of deals that closed in November and early December, according to accounting giant KPMG.

The bad news is that private equity-sponsored M&A deals in Canada totaled a mere $3.4 billion in 2010, far below the high of $39 billion set in 2007, according to analysis from KPMG’s Corporate Finance group.

The good news is that private-equity-led transactions are on the rise. About $1.7 billion, half the sum for the year, took place in November, said Peter Hatges, president of KPMG Corporate Finance.

In total, some 1,800 M&A deals closed in Canada in 2010 with an estimated value of $114 billion to $117 billion. Of that sum, private equity deals fell within their historical range of roughly 3 percent of the deal flow. 

“The full year statistics can be deceiving given the substantial pick-up in volume and deal value during the last half of the year,” Hatges said.

“The improvement in the last half of the year is a direct result of improving equity and debt capital markets and more involvement by private equity firms,” he said.

Not surprisingly, Canada’s natural resource sector was the locus of M&A activity. The bulk of the deals in 2010 involved Canadian mining, energy and industrial interests.

KPMG’s analysis found that increased demand from emerging markets was strengthening transactional values across Canada’s raw materials and natural resources sectors, spurring M&A deals.