Far from scaring off Canadian private equity firms, volatility in the stock market this year will act as fuel for PE deal making. That's according to a new report by Citigroup Inc. and Mergermarket entitled "Charting the course: The future of Canadian M&A in volatile markets."
"Although there is a lot of volatility in the market, that won't cause private equity firms to stay on the sidelines." said Grant Kernaghan, managing director, Canadian investment banking, with Citi in a telephone interview.
When asked which type of Canadian company they expect to lead deal making in 2015, 44 per cent of respondents said PE firms, 38 per cent answered regular Canadian companies and 16 per cent said pension funds. Fifty M&A practitioners were interviewed in December 2014 for the report.
Private equity firms aren't spooked by volatility because they can afford to ride out the bumps, added Mr. Kernaghan, because they typically have a five-to-seven year time horizon on their investments.
Though Mr. Kernaghan noted that Canadian PE firms are expected to be active buyers of depressed domestic energy assets, the report predicts Canadian firms will be particularly active in making international acquisitions. An unnamed financial services executive was quoted in the report saying they expect "international acquisitions will likely be larger as well as more diversified in terms of industries and regions."
Onex Corp., Canada's biggest publicly traded private equity firm, is the poster child for Canadian private firms doing big deals abroad. In January, Onex bought British life raft and survival suit maker Survitec Group for $680-million (U.S). Meantime, in November 2014, the Toronto-based firm bought Switzerland-based food packaging maker SIG Combibloc Group AG for $4.7-billion.