TORONTO Jan 9 Royal Bank of Canada led
investment banks in advising on equity issues and mergers and
acquisitions in Canada in 2013, but share issues overall rose
only slightly in the year and M&A activity fell hard.
In a year in which gold prices plunged and base-metal and
oil industry activity was hit by uncertainty over global
economic growth, the total value of M&A deals in 2013 fell by 31
percent to US$144.7 billion, according to data released by
Thomson Reuters on Thursday.
"We saw a pretty significant decline in activity in both the
energy and mining sectors, which have over the last five to 10
years accounted for half to two-thirds of the Canadian M&A
market," Peter Buzzi, co-head of M&A at RBC, told Reuters in an
Equity issues were dominated by a few large deals, with
Barrick Gold Corp's C$3.1 billion ($2.87 billion)
secondary offering a standout in an otherwise quiet mining
sector. Stepping in to partially fill the gap on the M&A and new
issues side were retail and real estate players.
All told, data showed banks completed 340 equity deals worth
C$34.2 billion, up from C$32.2 billion in 2012, according to
Thomson Reuters league tables for 2013.
RBC, which is typically at, or near, the top in all banking
categories, led in both M&A and in equity issues, including
initial public offerings.
The bank, Canada's largest, advised on 57 M&A deals with a
total value of US$32.6 billion, leading for the second straight
year and working on deals such as grocer Loblaw Cos
C$12.4 billion takeover of Shopper's Drug Mart Corp and
the US$6 billion purchase of Neiman Marcus Inc by two pension
RBC also was the clear leader in debt issues in 2013 as low
interest rates and favorable market conditions led to a banner
year for corporate and government debt in Canada in 2013.
Bank of America Merrill Lynch and Morgan Stanley
were also strong on the M&A side, advising on US$25.9
billion and US$23.8 billion, respectively, while Goldman Sachs
slipped to fourth from second a year earlier, advising on
US$17.2 billion. Bank of Nova Scotia was the next
Canadian bank after RBC, advising on US$17.0 billion.
All told, 2,488 acquisitions were counted last year in
Canada. The total value of US$144.7 billion paled next to
US$208.5 billion in 2012 and was the lowest total since 2009,
despite strength in retail and real estate.
With interest rates still low, executives said they expect
real estate activity to remain strong in 2014, while activity on
the resource side - typically the driver of Canadian M&A - will
take its cue from the economy as bankers say would-be buyers are
sticking to the sidelines, waiting for signs of strength.
"I think as long as we continue to have an improving global
economy, which appears to be where things are trending, I think
would should see improvement in the commodity sectors, both in
terms of energy and mining," said Mike Boyd, head of M&A for
CIBC World Markets, part of Canadian Imperial Bank of Commerce
On the gold side, where confidence has been shaken by
soaring mining costs and a 28 percent decline in the metal's
price last year, the possibility of more weakness could lead to
more deal flow, he said.
"If the gold price... continues to decline, I think there
will be a need amongst the gold companies to increase their
scale, reduce costs, deal with the margin pressure they're
facing, which I think will probably drive some consolidation,"
Top law firms advising on M&A deals were Torys, which guided
US$38.8 billion in deals, Davis Ward Phillips & Vineberg, which
advised on US$31.8 billion in deals, and Osler Hoskin & Harcourt
LLP, which advised on US$30.6 billion.
Bankers expect a stronger year for equity issues in 2014,
although they don't necessarily see the Barrick C$3.1 billion
offering jump-starting activity in the gold sector as worries
persist about emerging-market growth and the impact of the U.S.
Federal Reserve's tapering of its stimulus program.
RBC, at C$5.3 billion, led all banks in 2013 in advising on
Canadian stock sales, while Bank of Montreal was second
at C$4.7 billion, and Toronto-Dominion Bank third at
Despite the slump in M&A activity last year, three of the
biggest equity deals involved major takeovers, including Valeant
Pharmaceuticals' $8.7 billion takeover of Bausch & Lomb
and Empire Company Ltd's C$5.8 billion acquisition of
grocer Canada Safeway.
Peter Miller, head of BMO's Canadian equity capital markets
business, said he expects that trend to continue, with a busy
M&A pipeline driving stock issues in 2014.
IPOs jumped to their highest level in three years, at C$3.3
billion, up from C$2.5 billion in 2012, led by real estate and
energy deals, and helped by rising equity markets.
Miller said he sees technology, financial services and
industrials as areas to look for IPOs in 2014.
"These are all sectors that are most leveraged to North
American economic growth. That's where investors want to be,
those are the sectors that are performing the best and that's
where we're going to see the flow," he said.