Canadian equity fund deals drop to 27-year low on market volatility

Canadian equity fund deals drop to 27-year low on market volatility

(This October 6 story has been corrected to change John Clifford’s appointment to COO from CEO in the last paragraph.)

By Divya Rajagopal

TORONTO (Reuters) – The slump in Canadian M&A activity extended into the third quarter as volatile stock markets and rising borrowing costs fueled deal-making concerns, with equity-related issuances plunging to 27-year lows.

Despite the sharp decline, some bankers are beginning to see opportunities. HSBC Plc’s potential sale of its Canadian unit, valued at up to C$10 billion ($7.3 billion), and Dye & Durham’s A$1.27 billion ($815.85 million) bid for Link management’s corporate and banking sectors are among the transactions that could preoccupy bankers out the rest of the year.

Mergers and acquisitions deals in the three months ended September 30 fell 52% to $37 billion, the lowest level since 2020, bringing the tally for the first nine months of the year to $182 billion, down 28% from a year ago, according to the data. Released by Refinitiv on Thursday. The decline in Canadian M&A volumes is in line with the global trend.

Canadian tech firm OpenText Corp.’s $5.7 billion bid to buy UK-based Micro Focus International (NYSE:) PLC was the biggest deal last quarter, followed by Domtar (NYSE:) Acquisition of Resolute Forest (NYSE: Products Inc.) for $3.2 billion.

JPMorgan Chase (NYSE:) was the first M&A advisor, working on $34 billion worth of deals in the first nine months, followed by Morgan Stanley (NYSE:) and TD Securities.

Canadian stocks and equity-related stocks fell 77% in the first nine months to C$11 billion, the lowest nine-month tally since 1995, Refinitiv said.

โ€œDealing in Canada continues to see market sentiment and volumes decline, similar to other markets around the world, however we see meaningful opportunities in the current environment,โ€ said Alex Graham, President, Rothschild Canada.

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Royal Bank of Canada topped the league table of stock issuance, underwriting nearly C$2 billion in stock deals, followed by Scotia Bank and Bank of Montreal.

Energy and energy companies led equity financing, raising C$3.1 billion in the first nine months of 2022.

โ€œI think there is a fair amount of uncertainty now about what will happen in the next few months,โ€ said John Clifford, chief operating officer of McMillan LLP, a Toronto-based law firm that specializes in mergers and acquisitions.

(1 dollar = 1.3722 Canadian dollars)

($1 = 1.5567 Australian dollars)

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