A review of recent M&A transactions throughout North America and within Canada suggests that the M&A market is rebounding following a sluggish 2013. Q1-2014 trends have set a positive tone for the remainder of 2014.
Q1-2014 transactions build a strong foundation
In North America, four large deals in the Telecommunications, Media and Technology, Pharma, Medical & Biotech and Consumer sectors drove the highest Q1 results by value that the M&A market has seen over the past seven years. Total transactions in the region were valued at US$194.8 billion, a 53% increase over last year's Q1 results.
Mergermarket's recent Monthly M&A Insider Report outlined the key highlights in North American M&A deals as follows:
- Telecommunications: Deals in this sector represented the largest share of all North American M&A by volume and value. The telecommunications deals in Q1-2014 represented an 815% increase in value over the same time period last year even though the volume of transactions in this sector fell by 8%.
- Pharma, Medical & Biotech: This sector saw transactions valued at over $48 billion close in Q1-2014. Compared to 2013, this represented the biggest change in value with a 1,070% increase.
- Consumer: The value of deals in this sector in Q1-2014 (over $40 billion) remained relatively consistent year-over-year, with only a 3% increase in transaction value and 27% change in volume.
- Technology: Q1-2014 M&A increased in value and volume by 46% and 16%, respectively, over Q1-2013. Over $39 billion in M&A transactions have taken place in this sector.
- Energy, Mining & Utilities: Deals in this sector round out the top five sectors for North American M&A. The value of energy, mining and utilities transactions dropped by 33% to about $29 billion even though the transactional volume barely changed at 2%.
Remaining outlook for 2014
According to the Q1 2014 Intralinks Deal Flow Indicator, the above statistics represent a trend that M&A deals in 2014 will not grow much in terms of volume, but that growth in M&A will largely be driven by the size of deals.
A recent article in the Financial Post predicts these strong Q1 growth trends will continue for the rest of 2014. In respect of the Canadian market in particular, the Financial Post is optimistic about further M&A activity, which it predicts will be mainly driven by strong commodity prices, higher oil and gas prices, and a falling Canadian Dollar.
Despite this optimism, there are reports that any volatility in Canadian commodity prices could instantly change the outlook for Canadian M&A for the remainder of 2014. Furthermore, outside of North America, factors such as political instability, the timing of interest rate increases and other aspects of economic recovery could have a bearing on M&A transactions globally.
All in all, however, the majority of commentators remain enthusiastic about M&A deals in 2014. These sentiments are certainly supported by Q1 statistics, which show that M&A transactions are currently on the rebound in Canada and North America.
The author wishes to thank Kristine Spence, articling student, for her valuable assistance in preparing this legal update.
Norton Rose Fulbright Canada LLP
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