Strong dollar, high commodities boosting M&A activity
TORONTO—It’s going to be a year of big mergers and acquisitions in Canada’s manufacturing sector, according to a new report by PwC.
Global M&A activity this past quarter hit US$16.6-billion—a 157 per cent jump compared to a year ago.
The value of deals grew by a whopping 622 per cent, with 36 transactions above US$50 million.
In Canada, manufacturing deals reached US$69 million.
More than half of all Canadian activity was in the industrial machinery sector, followed by rubber and plastics, electronic and electrical equipment, and fabricated metals.
The biggest deal was the purchase of auto manufacturing supplier Van-Rob Inc.
Germany’s Kirchhoff Automotive bought the company from Clairvest Group Inc. and Clairvest Equity Partners for US$35.8 million.
Activity varied across the country, with western provinces seeing more of an increase for mining and raw materials.
“In Ontario, we saw a pick up in outbound activity for automotive companies, especially for larger tier ones looking for opportunities outside of North America,” said Damien Peluso, partner in PwC’s deal practice partner.
But Peluso said maintaining margins and profitability should still be the priority for small to medium-sized manufacturers.
“For some of the smaller firms, going global may not be the best alternative. It’s a significant investment not only in money, but the time to look for the proper opportunities,” he said.
The report expects Canadian M&A activity will keep climbing this year, with some steep purchases already recorded so far in the second quarter.
Berkshire Partners and OMERS’ recently announced their US$2.1-billion acquisition of Husky Injection Molding Systems.
And Chemtrade Logistics Income Fund is acquiring Marsulex Inc. for US$546 million.
The report expects the strong dollar and higher commodity prices will keep driving consolidation in Canada while ongoing disruptions in Japan’s auto supply chain will make auto companies here more attractive takeover targets.