Royal Bank of Canada reclaimed the top spot for managing Canadian stock sales this year as a surge in acquisitions sparked large deals and helped boost the annual amount to the highest since 2009.
Equity financing reached $43.1-billion this year, up 10 per cent from 2014, according to data compiled by Bloomberg. While the amount raised in Canadian initial public offerings, secondary sales and equity-linked securities was the most in six years, the number of deals was the lowest in 12 years.
Many smaller companies shied away from the equity markets, and large Canadian corporations raised money for buying assets outside the country. Many resource firms turned to stock sales early in the year to bolster balance sheets as a commodities slump challenged Canada's resource-led economy. Growth in the IPO market was driven by new entities set up to make acquisitions.
"It was a year of a number of successful large transactions, with strong support from both institutional and individual investors," said Kirby Gavelin, head of Canadian equity capital markets at Royal Bank's investment-banking unit. "Large transactions represented a larger proportion of total activity this year than they did in prior years."
RBC Capital Markets returned to the No. 1 rank after slipping to second in 2014, while Bank of Nova Scotia fell from first to third, the data show. RBC led or co-led seven of the 10 equity financings that raised more than $1-billion, including Emera Inc.'s $2.19-billion offering of convertible debentures in September to finance its $6.5-billion takeover of Florida utility owner Teco Energy Inc.
Those large deals helped boost volume even as the total number of deals fell to 319, down from 473 last year and the lowest since 2003, the data show. The figures and rankings, which exclude preferred share sales and self-led deals, were current as of Dec. 23 and may change as more transactions are recorded.
More than two-thirds of the amount raised occurred in the first half of the year, as equity financings cooled in the last four months amid a global rout in equities markets and plunging commodity prices. Stock sales may not regain momentum until the end of next year, when takeovers and deals involving energy and yield-oriented companies pick up, said Peter Miller, head of Canadian equity capital markets at BMO, which ranked second for the year.
"We had a very light beginning of the year - challenging - then we had a tremendous middle of the year and then we finished with a very weak end," Mr. Miller said in an interview. "That is going to be with us for some time. It's not only the buy side that's shell shocked and staying on the sidelines, it's also issuing clients."
Firms tapped equity markets to raise cash to pay for purchases in the busiest year for Canadian acquisitions since 2007. Element Financial Corp. - BMO's marquee deal - raised $2.61-billion a month before it agreed to buy General Electric Co.'s fleet management operations in the U.S., Mexico, Australia and New Zealand for $8.6-billion.
"M&A has been a real engine for the equity markets and in particular for the Canadian bank-owned dealers," said Mr. Miller of BMO, which led the Element financing. "M&A was probably about a third of all equity issuance, and that's going to continue to be a main driver."
Next year could bring activity from companies grappling with lower commodity prices. Global resource conglomerates are considering spin-outs, carve-outs and IPOs of businesses, while acquisitions and restructurings among energy exploration and production companies may fuel more deals, said John McCartney, head of global equity capital markets at Scotiabank.
"There's good M&A dialog going on that could lead to some sizable transactions again in 2016," Mr. McCartney said. "A lot of restructuring will continue in the E&P space in energy and energy infrastructure is under pressure as well, so we could see further consolidation, spin-outs and that sort of thing."
The year was the biggest for IPOs since 2010, as eight offerings that sold more than $200-million accounted for 70 per cent of the $5.71-billion raised in 2015. Ontario's $1.83-billion sale of 15 per cent of Hydro One Ltd. was the largest IPO since 2000. TD Securities was the No. 1 arranger of IPOs.
The rise of special purpose acquisition companies, or SPACs, fuelled the 37-per-cent jump in IPOs. Five SPACs, a buyout vehicle that raises money for unspecified acquisitions, accounted for $1.1-billion of Canada's IPO activity. Dundee Acquisition Ltd. was the first, with its $112.3-million offering in April, while Acasta Enterprises Inc. raised the most, with its $402.5-million July sale. Two more SPACs - a $110-million sale for Avingstone Acquisition Corp. and a $70-million deal for Kew Media Group Inc. - are in the works for next year.
"The SPAC market is a new source of capital to the market and one we think is going to be exciting going forward as those companies undertake their qualifying acquisitions," said Patrick Meneley, head of global corporate and investment banking at TD Securities, which arranged four SPAC deals. "There was a lot of demand this year for non-resource based IPOs."
Other IPOs that may surface next year include PointClickCare Corp., a Canadian health-care software provider, which filed documents with regulators in September for an initial offering in Canada and the U.S. that's expected to raise around $100 million, and Vancouver-based marketing software company Vision Critical Communications Inc. Spokeswomen for PointClickCare and Vision Critical declined to comment.
"We still have a pretty healthy IPO pipeline, mostly focused on non-resources and there's a number of issuers that are basically waiting for the right market tone," said Benoit Lauze, CIBC's head of equity capital markets. "We're talking to a lot of people right now and our advice to people that will need to come to market is, 'Get ready.'"