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Canadian M&A jumps 28% in third quarter, but market volatility could slow deals


• Canadian mergers and acquisitio­ns activity for the third quarter hit its highest since 2016 as historical­ly low interest rates and strong equity markets helped companies to revive transactio­ns that were put on hold due to the pandemic.

Dealmaking rose 27.7 per cent to US$76.6 billion in the third quarter of the year, but was significan­tly down from the record US$120.3 billion recorded in the first three months of the year, according the Refinitiv data.

Bankers said while factors underpinni­ng M&A exists and pipelines are strong, equity market volatility could slow the deal momentum.

“Higher deal flow in the third quarter was driven by a combinatio­n of factors including strong equity markets, historical­ly low borrowing costs and market confidence in a gradual COVID-19 recovery,” said Jake Lawrence, Group Head and CEO, Global Banking and Markets, Scotiabank.

However, he said shortterm inflationa­ry and supply chain concerns are unlikely to have a material impact on deal flow given investor focus on long-term strategic considerat­ions.

Transporta­tion and infrastruc­ture-focused deals led activity in the third quarter, with US$33.6 billion in M&A activity, including Brookfield Asset Management’s A$9.57 billion (US$6.95 billion) bid for Australia’s Ausnet Services, and Brookfield’s US$3.4 billion planned takeover of Dexko Global Inc.

Higher inflation in Canada and the United States has stoked worries about central banks dialing back pandemic-era liquidity support and prospects of higher interest rates. That has increased stock market volatility.

“I guess the big threat that’s overhangin­g the M&A landscape is the threat of rising interest rates,” said Sarfraz Visram, head of Canadian and internatio­nal mergers & acquisitio­ns at Bank of Montreal.

Despite the strong stock markets, equity offerings fell for the second consecutiv­e quarter, almost halving in the third quarter to $6.8 billion from the previous quarter.

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