Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

A wave of big deals in recent weeks has financial players predicting 2021 could be the most active year in recent memory for Canadian corporate mergers and acquisitions as the economy starts to shake off the brutal effects of COVID-19.

After a second-quarter collapse in 2020, when many deal talks broke off in response to the pandemic, the recovery in activity began. Many businesses disrupted by restrictions on movement and weighed down by debt became targets, while others thrived in an environment in which more people worked from home, and those winners sought new assets.

A new cycle has begun, said Manny Pressman, a lawyer who specializes in M&A at Osler Hoskin & Harcourt LLP. The activity is being driven by a mix of sources: companies seeking strategic growth in their sectors, private equity deploying capital and special purpose acquisition companies eyeing targets in Canada.

Story continues below advertisement

“The switch flicked on in November in terms of when deals started to hit the tape and when they started to get real traction,” he said.

Anticipation of the rollout of coronavirus vaccines has injected optimism about the economy. In addition, record low interest rates, equity markets that can be easily tapped for financing and a mountain of private capital to invest are expected to propel activity.

“This is probably the best market for M&A financing that I’ve seen in my career, which is 25 years now,” said Mike Boyd, head of global M&A at CIBC World Markets.

“For three or four months this year, all our capital was on the sidelines. Now it’s back out and looking to be deployed, and I think there is a consensus view that the economy is going to get stronger as we get through the pandemic,” Mr. Boyd said.

According to the investment banking boutique Crosbie & Co., the number of announced deals picked up in the third quarter of 2020, although the dollar value was well under historical norms. A total of 804 deals were announced with an aggregate value of $18-billion.

That was a sharp rise from the second quarter, when there were 600 transactions worth a total of $14.2-billion. Still, in terms of dollar value, it paled compared with the third quarter of 2019, when $45-billion worth of deals were announced.

Canada lagged the global recovery in M&A early in the second half, but that is changing, said Peter Buzzi, co-head, global mergers & acquisitions for Canada at RBC Dominion Securities.

Story continues below advertisement

“Part of that is pent-up demand for companies that were looking to run sale processes in the first half and deferred them,” he said. “But I think more of it is just we have an exceptional environment for financing M&A transactions now.”

Mr. Buzzi and others pointed to the energy sector for consolidation opportunities next year, as the industry seeks to gain efficiency and scale and thereby rekindle the interest of major institutional investors. Like mining and precious metals, this could mean more all-stock transactions that offer investors little or no price premium.

In December, Whitecap Resources Ltd. announced just such a deal: a $565-million purchase of fellow Alberta and Saskatchewan crude producer Torc Oil & Gas.

Among some of the biggest deals announced in 2020 were Cenovus Energy Inc.’s $3.8-billion takeover of Husky Energy Inc. and SSR Mining Inc.’s $2.4-billion buyout of Denver-based miner Alacer Gold Corp.

Natural gas producers such as Canadian Natural Resources Ltd. and Tourmaline Oil Corp. bought up rivals in B.C. and Alberta resource regions such as the Montney and Deep Basin.

In November, Intact Financial Corp. and Denmark’s Tryg A/S teamed up to offer $12.4-billion for British rival RSA Insurance Group PLC, a deal that would make Intact the dominant property and casualty insurer in Canada. West Fraser Timber, meanwhile, is adding to its product lines with its $4-billion friendly offer for Norbord Inc., also announced that month.

Story continues below advertisement

In tech, Nasdaq Inc. announced in November it is buying St. John’s-based Verafin for US$2.75-billion in a deal that will expand the reach of Verafin’s fraud-detection software to banks around the world. Shortly afterward, British private equity firm Hg Capital announced it will buy a controlling stake in Calgary-based Benevity Inc., a deal that valued the corporate-giving software provider at US$1.1-billion.

Such deals in the tech sector show no sign of tailing off, said Shevaun McGrath, partner at McCarthy Tétrault LLC, and co-head of the law firm’s national private equity group. “I think the focus on data and the privacy regulatory landscape will be something that will be a big focus next year, and I suspect the year after as well,” she said.

But a proposed marriage that fell apart during the pandemic also points to what will be a sharpened focus on the fine print of transactions, Ms. McGrath said. Much has been made about material adverse event clauses, which spell out what unexpected factors could render an agreement void.

Cineworld Group PLC’s decision to scrap its deal to buy Cineplex Inc. as movie theatres remained shut in June showed the importance of interim covenant clauses. They spell out the requirements to operate within set parameters until a deal closes.

Cineworld, which signed the deal in late 2019, alleged in court documents that Cineplex failed to meet conditions to keep its debt below a set ceiling and maintain payments to suppliers and landlords. In its legal response, Cineplex said its suitor got cold feet as brutal industry conditions persisted. The case is scheduled to go to trial next September.

“We’re learning as we go here in terms of the art of the possible, and now drafting differently, certainly, than we did prior to the pandemic,” Ms. McGrath said.

Story continues below advertisement

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies