A surge in big-ticket deals delivered one of the most robust years for Canadian mergers and acquisitions in 2014, up 42 per cent over 2013.
The value of M&A deals involving a Canadian buyer or seller was up to $203.1-billion (U.S.) in 2014, according to data from Thomson Reuters, with many of the largest deals involving a foreign target or acquirer. That was up from the $143-billion reported last year.
Amid these international deals, U.S. investment banks were big winners in M&A, with only three Canadian investment banks ranking among the top 10 advisers on deals, as viewed by value.
Goldman Sachs & Co. lead the pack, advising clients on 35 deals worth $56-billion. That included a role in the second-largest acquisition of the year, when Talisman Energy Inc. was bought by Spain's Repsol SA for $12.8-billion, including net debt, in December. RBC Capital Markets were the runners up in the M&A table, with $47.7-billion worth of acquisitions.
Other international players such as JPMorgan Chase & Co., Barclays PLC and Morgan Stanley also benefited from the high number of mergers that involved foreign buyers or sellers.
The biggest deal of the year was Tim Hortons Inc.'s $14.6-billion, tax-driven marriage with Miami-based Burger King Worldwide Inc.
Foreign firms also had prime positions in the top legal rankings, with four of the top 10 firms based outside of Canada. Still, Osler Hoskin & Harcourt LLP came out at the top, working on deals worth $50.4-billion last year.
Peter Buzzi, co-head of mergers and acquisitions at RBC, said he expects more cross-border deals as Canadian buyers continue to look for assets outside the country, and foreign investors search for opportunities in Canada. RBC was an adviser on several major deals involving a foreign buyer, including Tim Hortons and SNC-Lavalin Group Inc.'s $5.5-billion deal to sell electricity transmission company AltaLink LP to a subsidiary of Warren Buffett's Berkshire Hathaway Inc.
Outside of energy deals, Mr. Buzzi said, many of the year's mega mergers – such as Manulife Financial Corp.'s $3.7-billion purchase of the Canadian operations of Standard Life and BCE Inc.'s similarly sized acquisition of its regional partner Bell Aliant Inc. – were unique, company-specific transactions that didn't contribute to a theme in any particular sector. He expects that will be the case again in 2015.
RBC retained its position at the top of the bond business in 2014, bringing in $34.2-billion (Canadian) for clients.
The energy sector was a major driver of activity in 2014, even as faltering oil prices cast a shadow over deal volumes in the final months of the year. "We may have seen a few more transactions in the last part of the year, had energy prices held," said John McCartney, head of global equity capital markets at Scotia Capital. Now, companies in the sector have hit the pause button, re-evaluating spending and corporate development plans, he added.
In the equity tables, Scotia Capital came out ahead, leading $5.5-billion in stock sales. The bank benefited from its position as sole underwriter on major offerings by Manulife and pipeline and power company Veresen Inc.— two financings linked to acquisitions.
Total equity sales hit $37.3-billion in 2014, excluding the banks' self-led deals, with many companies turning to equity markets to fund M&A or international expansion. The total came close to 2009's $48-billion sum, which was marked by companies turning to the market to shore up capital in the recession.
Initial public offerings had a second strong year in a row, with 11 new issues raising proceeds of about $3.9-billion. More than 80 per cent of that value came from the energy sector, including PrairieSky Royalty Ltd. and Seven Generations Energy Ltd.
The decline in oil prices has shaken the market for potential new IPOs, says Roman Dubczak, head of equity markets and wholesale banking at CIBC World Markets, which was the top bookrunner in that category last year. "This hits the reset button, clearly."
Still, investment banks say there's plenty of appetite for new issues in the equity market. Activity is expected to come from sectors such as retail, consumer products and technology, and perhaps through the division of some mining conglomerates.