M&A activity dips in Q2

TORONTO—The second quarter of 2013 was the second-quietest quarter for mergers and acquisitions (M&A) in three years, according to the latest data from tax and risk management firm PwC.

Despite deal volume increasing just 10 per cent, Q2 2013 saw a 62 per cent increase in M&A value over the previous quarter, driven by the return of deals worth more than $1 billion and a 23 per cent average increase in reported deal values, excluding the big acquisitions.

While real estate continued to be the top target industry by value in Q2, Sobeys’ C$5.8 billion purchase of Safeway’s Canadian assets—the quarter’s biggest deal—and two deals over $1 billion in the forestry industry resulted in these two sectors becoming the second and third most active industries by deal value. Loblaws’ C$12.4-billion acquisition of Shoppers Drug Mart stores announced on July 15 will keep the food retail among the top sectors in Q3.

Turning to the forestry sector, two of the largest deals come from Brookfield and associated investors returning timber assets into the hands of strategic buyers. Weyerhaeuser picked up Longview Timber for $2.65 billion and Kapstone Kraft Paper took Longview Fibre Paper and Packaging for $1.03 billion.

Looking forward
Julian Brown, Deals Partner, and PwC Corporate Finance Leader for the Americas, says “While Q2 was a welcome uplift from Q1, we are still well below post-crash levels of activity in the Canadian M&A market in value terms. Given the importance of the natural resources sector to our economy and the expected lack of relevant transactions in this sector in the near term, other sectors will have to make up a lot of ground if we are to return to normal activity levels.”