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mergers and aquisitions

Trelawney mining and exploration Inc., in Ontario between Sudbury and Timmins.Trelawney

This has been a busy year for Brian Pukier, a partner with law firm Stikeman Elliott LLP and head of its Toronto mergers and acquisitions group. After a slow summer last year, the M&A space is finally back to normal, he says. "We'd always like more deals, but our firm is keeping busy," he says.

Mr. Pukier's firm does a lot of work in the resource space; he's seen a lot of deals done in mining, energy and oil and gas, in particular. He points to high commodity prices, demand from Asia and higher overall confidence in the economy as reasons for the increase.

M&As won't return to 2006-2007 levels, when everyone was making deals, he says, but the rest of the year will only get better. "As long as banks are lending, which they are, then I think we're going to stay at least consistent," he says.

While this country's M&A market is doing nicely, the same can't be said for the rest of the world. Global M&A activity last quarter was down 23 per cent year-over-year, according to Dealogic, a London, U.K.-based company that helps banks analyze capital markets. While volume reached $574.2-billion, it was the lowest quarterly figure since the third quarter of 2009 and the slowest start to the year since 2004.

Around the world, the oil and gas sector, followed by the mining sector, were the two busiest industries – the mining sector hit a quarterly record with $71.4-billion worth of deals. Because resources make up a large portion of Canada's market, it's easy to see why Mr. Pukier hasn't noticed a slowdown.

In fact, Canada was one of the few countries that Dealogic tracked in which the value of M&A deals increased. While the number of deals fell by 10 per cent year-over-year in the first quarter, the value of those transactions rose to $44.7-billion from $26.7-billion.

Norman Raschkowan, executive vice-president of investments for Mackenzie Financial Corp., also thinks there will be more activity – in Canada and globally – in coming months. Corporate managers, he says, are feeling better about the economy. "That makes it easier for them to go ahead with acquisitions," he explains.

Around this time last year, people were worrying about a Greece default and a double-dip recession. But with better employment numbers in the United States, improving housing data and fewer worries about a European meltdown, the double dip fears have mostly subsided, he says.

It also helps that the U.S. Federal Reserve has committed to keeping interest rates low until 2014. Bottom-basement rates make it less desirable for companies to keep their dollars, which they've been amassing, in cash. "A lot of companies have a lot of money," says Mr. Raschkowan. They can either grow through acquisition or, he says, "leave their assets in cash and have it yielding nothing."

Adley Bowden, director of research for Seattle-based PitchBook Data Inc., a company that tracks private equity and venture capital deals, also thinks we'll see more M&A activity in the coming months, especially from the private equity sector.

U.S. private equity firms, he says, have about $425-billion worth of investments that they must spend within three to five years. "That's a lot of cash," he says and these firms have been holding onto that money for a year or two. "There's a powder keg of money and people trying to do deals out there," he says. "So the last half of the year will definitely be better than the first."

Mr. Bowden points out that, since the recession, it's taking longer to close a deal, which is one reason M&A activity has been up and down over the last year.

Companies are more diligent, asking more questions and taking a closer look at financials than they did before the meltdown, he explains. It used to take a quarter to close a deal, now it's between six months and a year.

While Mr. Bowden thinks every sector will benefit from increased M&A activity, Mr. Pukier says Canada's telecom space could see more activity than most. Loosening foreign investment restrictions, he says, could see bigger international companies buy out some domestic telecoms.

Whatever happens, Mr. Pukier will likely be working around the clock for a while.

"We've had a pretty good first quarter," he says, "and as long as the credit markets stay healthy and resource prices stay strong, we'll have more good quarters, too."

M&A activity

While other countries saw the number of deals and the value of transactions fall in the first quarter of this year, Canadian M&A volume was the highest it's been since the third quarter of 2008.

According to data provider Dealogic, the oil and gas sector led the way with $16.3-billion worth of activity, the highest quarterly volume since late 2009.

Six oil and gas-related deals worth $1-billion or more were announced in the first quarter of this year, with the largest being Pembina Pipeline Corp.'s $3.7-billion bid for Provident Energy Ltd.

Dealogic also notes that RBC Dominion Securities Inc. was involved in the most deals – 19, worth about $20-billion – while TD Securities Inc. came in second with 14 deals worth about $16-billion.

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