Quebec Transaction Snapshot

First half 2017

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Increased Economic Activity, Prime Rate, Confidence, Deal Volumes and Values

Notwithstanding increasing global geopolitical concerns, a healthy start to the year in Canada in areas such as employment, consumer spending, housing and record wholesale sales data during the first 6 months of the year has resulted in the strongest economic performance in Canada since October 2000, when year-over-year GDP growth exceeded 4.7%. And people are taking note! On July 12th, the Bank of Canada raised its prime interest rate by 25 basis points to 0.75%, the first hike to the target overnight rate in over 7 years and then did so again by another 25 basis points to 1.0% just 56 days later on September 6, 2017. The International Monetary Fund revised its expectations for Canada’s economic performance for 2017 to 2.5% in its latest World Economic Outlook, leading all G7 countries in growth. Moreover, foreign buyout firms have helped push private equity investment in Canada to new heights during H1-2017, with H1-2017 deal values up 55% to $14.6 billion (an all-time high) and deal volumes up 10%, as well.

In Quebec, although preliminary data for H1-2017 shows that deal volume was constant with the prior-year period at 181 transactions, Q2-2017 reported an increase in deal volume to 100 transactions vs. 81 in Q1-2017 as well as an increase in reported deal value to $15.9 billion from $10.1 billion in Q1-2017. Excluding mega transactions valued a +$1.0 billion, average transaction size in Quebec also increased from $81.2 million to $104.2 million, still well-above the rolling 8-quarter average of $75.0 million. Quebec companies completed a total of 69 transactions during Q2, acquiring 15 targets within the province but doing 64% of their shopping in the rest of Canada while completing 7 deals in the US and 3 in the rest of the world.

Macroeconomic uncertainty, geopolitical instability and technological change are creating unprecedented business disruption worldwide. These dynamics, coupled with a low-growth environment in developed countries, increasing shareholder pressure and changing consumer preferences are prompting a critical decision: how best to allocate capital to gain competitive advantage? Divestments are a fundamental part of portfolio strategy, especially in a volatile and disruptive environment. Companies are selling non-core and slow-growth businesses to fund investments in their core portfolios. They are putting capital to good use: from making acquisitions and investments in digital capabilities to expanding product ranges and geographic footprint. This edition highlights key excerpts from EY’s most recent Global Corporate Divestment Study, where these trends and others shaping divestment strategies are identified.

As we did not publish a Q1-2017 edition of the Quebec Transaction Snapshot this year, this edition highlights selected transactions in the province during H1-2017 and profiles our most recent closing; the sale of Skyfold Investments Ltd., the world’s leader in vertically folding operable acoustic walls, to dormakaba, a global leader in security/access systems and moveable walls. We also profile our Operational Transaction Services practice, which helps purchasers accelerate the integration process while increasing the realization of expected transaction value.

I hope you enjoy this edition and those that follow,

Todd Caluori

Todd Caluori, CPA, CA, CBV
Editor and Associate Partner, M&A Lead Advisory

 

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Quebec Transaction Snapshot - First half 2017
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