Canadian bank headquarters stand on Bay Street in Toronto on Aug. 29, 2011.Brent Lewin/Bloomberg
Canadian deal flow surged in the first half of the year, with large financings and acquisitions contributing to a hike in business for investment banks.
Canadian new equity issuances flew high in the first six months, as investment banks raised more than $30-billion for companies, according to data from Thomson Reuters.
That was a 45-per-cent jump over the first half of last year, when $20.8-billion was raised. It's also roughly double the amount raised in 2013, when activity reached just $14.5-billion in the first half of the year.
Canada is hardly the only country with a booming market for deals. Mergers and acquisitions in the United States have surpassed $1-trillion (U.S.) for the first time ever, according to figures from Dealogic on Tuesday. As if to underscore that global megadeals are back, Swiss insurer ACE Ltd. said Wednesday it would buy U.S. competitor Chubb Corp. for $28.3-billion in cash and stock.
A confluence of factors are likely driving this activity, such as companies' rising stock prices, low interest rates and private equity and pension funds flush with piles of cash to invest.
In Canada, blockbuster bought deals were a significant driver of activity, with seven stock sales worth more than $1-billion (Canadian) sold so far this year, the Thomson Reuters figures show. The largest, worth more than $2-billion, was Element Financial Corp.'s recent financing of its purchase of General Electric Co.'s fleet management business in the United States, Mexico, Australia and New Zealand.
RBC Dominion Securities was the top equity underwriter in the first two quarters, leading more than $5.8-billion in deals. BMO Nesbitt Burns and CIBC World Markets also made the top three.
A couple of Canadian banks notably regained their status as top advisers on M&A so far this year, after being largely squeezed out of the top spots in the first quarter because of rampant cross-border deals. But that doesn't mean the international dealmaking has slowed. Only two of the top ten largest tie-ups so far this year have involved a Canadian target. Fairfield, Conn.-based GE, for instance, not only got cozy with Element, but also struck a $12-billion (U.S.) deal to sell its private-equity lending arm to Canada Pension Plan Investment Board, the largest acquisition ever for Canada's largest pension fund.
RBC led the rankings in M&A, followed by BMO and JP Morgan. The Canadian banks got a big boost from their work on the largest transaction recorded so far this year, which was the Enbridge Inc.'s restructuring and asset sale to Enbridge Income Fund. This transfer, also known as a drop-down, involved renewable energy assets, pipelines and other offerings, and had a value of nearly $25-billion in the quarterly dealmaking tables.
Adding extra momentum to the markets was the wave of initial public offerings that broke in the second quarter, rolling toward the Toronto Stock Exchange following the first-quarter launch of Fairfax India Holdings Corp.
Eight new issuances came through in the second quarter and several generated substantial investor demand. The IPO surge gathered steam after the success of Cara Operations Ltd.'s launch, which was about 20 times oversubscribed. The business, with its stable of brands such as Swiss Chalet, Harvey's and Milestones, drew more interest than even the Tim Hortons IPO. After Cara came the Ottawa e-commerce darling Shopify Inc., which went public in an IPO that was close to 30 times oversubscribed.
But not every deal has been a dream so far. Getting Silver Wheaton Corp.'s billion-dollar bought deal sold involved a repricing, and underwriters had to take some losses back in March. More recently, Tahoe Resources Inc.'s effort to raise almost $1-billion also struggled.
In debt, RBC, CIBC and National Bank Financial led the quarterly deal tables, excluding self-funded new issuance.