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Cropped image of a business woman offering you a handshake during an interview (Jesper Elgaard/iStockphoto)
Cropped image of a business woman offering you a handshake during an interview (Jesper Elgaard/iStockphoto)

Will M&A go big in the second half? Add to ...

With the cloud of the second-quarter earnings season nearly blown over, companies are talking about potential growth areas for the rest of the year. It seems merger and acquisition advice is one area where there are signs of improvement.

After investment fund company CI Financial announced a quarter of reduced profits on Thursday, CEO Stephen MacPhail took a minute on the conference call to offer his thoughts on the potential for future deals in his industry. “We saw a lot of the earnings that have been coming out recently, and there are a lot of companies that are really struggling out there,” he said. “I honestly don’t know how they make it on their own, and so I think that’s just going to lead to more transactions.”

Investment bankers also seem optimistic about growth in M&A. During Canaccord’s earnings call this week, the management team was asked about opportunities for revenue synergies (the firm recorded a steep loss in its first quarter of 2013). The company responded that it sees some opportunities in the M&A space, and some on the restructuring side.

An improvement here would certainly be welcome since global M&A volumes for the first half of the year looked as weak as 2008. Still, the promise of improved M&A activity can sometimes be cause for a little doubt--potential future deals are often held up as a source of optimism, but in the end bankers can’t force an unwilling company to commit to buying or selling.

That said, Canaccord called the number of deals in its pipeline “very strong” and indicated the next quarter will benefit from several large advisory fees set to close in the quarter. With this, the company believes it is “on track to achieve another year of record advisory revenue.”

On the global front, Europe has been a notable source of M&A activity, and PwC’s numbers for the second quarter indicated that acquisitions outside of Canada were strong at $21.8-billion. (At Canaccord, much of the strength of their current quarter M&A advisory division boiled down to their expanded team in UK and Europe.)

But even with some growth abroad, deal volumes are still down and many firms have been reluctant to commit to purchases or sales. Numbers out of Thomson Reuters show that in the first six months of 2012 resource and energy sectors have produced a declining number of deals compared to last year’s rate.

Amid this rocky terrain, companies may feel it is safer to keep waiting around to avoid buying up a company that could continue to tank, or selling their firm at the very bottom of the curve. That said, as Mr. MacPhail seems to suggest, some of those candidates could be running out of time to waffle.

“There’s no sense waiting until your company’s dying before you do a transaction,” Mr. MacPhail told investors on the call. “And I think... you’ve seen a lot of companies really struggle in this quarter.” He also pointed to CIBC’s recent purchase of McLean Budden to boost its wealth management division as an example of one recent “interesting transaction.”

 

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