JPMorgan Leads Canadian M&A for the First Time in Five Years


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JPMorgan Chase & Co. was the top adviser for Canadian mergers and acquisitions last year, leading the charts for the first time since 2017 and boosting the value of deals it handled even as the broader market cooled from the prior year’s record activity.

New York-based JPMorgan advised on 31 announced deals involving Canadian companies in 2022, for a combined value of US$73.6 billion, according to data compiled by Bloomberg. That’s up from the US$68.1 billion in deals it handled in 2021.

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The total value of all Canadian acquisitions announced last year was US$331.7 billion, down 25 per cent from a record US$440 billion in 2021. The rankings and data are as of Jan. 3 and may change as more deals are recorded.

Last year started strong, with the first half matching 2021’s record pace, but the volume tapered off in the second half as rising interest rates and economic uncertainty roiled markets. Still, Canada’s overall deal volume in 2022 was higher than the five-year average, helped by the outsize influence of Brookfield Corp. and the nation’s large pension funds.

Activity from those types of buyers may be more muted in 2023 after central-bank rate hikes and recession concerns boosted borrowing costs, said David Rawlings, chief executive officer for Canada at JPMorgan. The total volume of Canadian deals this year may be somewhat slower than in 2022, he said.

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“The forces of pension-fund and financial-sponsor growth may be offset by a more challenging financing environment,” Rawlings said in an interview. “Even if financing markets improve, interest rates are considerably more expensive than in 2020 and 2021.”

The largest deal announced last year that involved a Canadian company was Nielsen Holdings Plc’s March agreement to be taken private by a group that included Brookfield Asset Management Inc. for about US$16 billion.

That was followed in size by Toronto-Dominion Bank’s US$13.4 billion agreement to buy First Horizon Corp., announced in February, and Royal Bank of Canada’s US$9.9 billion planned acquisition of HSBC Holdings Plc’s Canadian unit, from November.

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Brookfield was involved as a buyer or seller in US$65.3 billion of deals, roughly 20 per cent of the year’s total. Canada’s pension funds were involved in acquisitions of a U.K. gas-distribution business, the Middle East’s largest port and a French solar-farm developer.

While the rapid increase in interest rates and widespread expectation of a recession make it difficult to predict the path for dealmaking in 2023, financial sponsors will continue to spend on energy transition-related deals, said Michael Klym, head of Canadian mergers and acquisitions at Goldman Sachs Group Inc.

Over the long term, the sector will benefit from the deployment of trillions of dollars of capital, he said.

“That can be investing in green energy itself, or it can be making things more efficient and less energy-consumptive,” Klym said in an interview. “It’s a broad remit, and it’s going to take a lot of capital, but that is a priority for every pension or sponsor that we talk to.”

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Capital advantage

Any broader increase in M&A activity will require stabilization in financing markets and clarity on the economy, said Ben Mandell, head of Canadian mergers and acquisitions at Royal Bank of Canada. Until then, companies that don’t require significant debt financing may have an advantage, a reversal from years when private equity was able to outbid them, he said.

“If you’re a well-capitalized corporate, you can get deals done in this environment, and you may even have an advantage in getting deals done because of the dislocation in financing,” Mandell said in an interview.

With the decline in valuations, strategic buyers with strong balance sheets will make “wish list” acquisitions, said Dougal Macdonald, president of Morgan Stanley Canada. But even with the financing advantage they may have in the current environment, shareholder scrutiny of deals will be higher because of the uncertain economic picture, he said.

“Also with valuations down, there can be a disconnect between what a buyer is prepared to pay and what a seller expects,” Macdonald said in an interview. “If there are dialogs going on but not a meeting of the minds, it could lead to an increase in unsolicited activity.”



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