Glencore’s [NYSE:GLEN] USD 32bn offer in April for Vancouver-based miner Teck Resources [TSX:TECK.A] propelled Canadian dealmaking to its highest second-quarter total since 2007.
M&A volume in Canada exceeded USD 53.8bn in 2Q23, following a weak first quarter when deals worth USD 13.6bn were announced, according to Mergermarket data.
Boosted by Glencore’s bid, which Teck rejected, the Great White North’s mining industry accounted for nearly half (47%) of Canada’s M&A volume in the year to date (22 August).
Dealmaking in the sector has been driven in part by mining companies looking to replace their high-grade gold reserves, according to Gary O’Connor, CEO of Toronto-based Moneta Gold [TSX:ME]. Such gold-focused mining deals included the acquisition of Sabina Gold & Silver for USD 883.9m by B2Gold [TSX:BTO], completed in April, and the USD 441.6m purchase of Osisko Mining’s [OSK:TSX] Windfall gold project by Gold Fields [NYSE:GFI] in May.
Energy transition fuels mining M&A
The global rush for metals and minerals critical for the energy transition – including lithium, nickel and copper – also has spurred Canadian mining M&A.
Automakers have started to invest directly in miners or projects as they look to reduce the cost of electric vehicle battery cells: General Motors [NYSE:GM] announced in January it would invest USD 650m in Lithium Americas [TSX/NYSE:LAC]. Chemicals company Albemarle [NYSE:ALB] also agreed to invest USD 82.5m in Canadian lithium exploration company Patriot Battery Metals [TSX-V:PMET] in July.
More lithium-related deals are expected as Canada works towards becoming the global leader in the production of batteries for electric vehicles. As part of its critical minerals strategy, the Canadian federal government wants to speed up the approval of new mines so it can challenge China’s minerals dominance.
Oil sands out
In oil and gas, TotalEnergies’ [EPA:TTE] retreat from Canada accounted for two-thirds of the sector’s year-to-date (YTD) deal volume of USD 11.6bn. The French energy giant agreed to sell its Canadian oil-sands subsidiary TotalEnergies EP Canada to Suncor Energy [TSX:SU] for USD 4.5bn in April and a 50% stake in the Surmont oil-sands project to ConocoPhillips [NYSE:COP] for USD 3.3bn in May.
Divestitures and carve-outs will continue to drive dealmaking in Canada’s oil-and-gas sector as the world continues to transition away from fossil fuels, forcing companies like TotalEnergies to exit the emissions-intensive Canadian oil sands, said one sector advisor.
AI rising
Despite a plunge in venture capital funding following sluggish economic growth and rising interest rates, Canada’s technology sector recorded the third highest YTD volume of USD 6.7bn across 196 deals. However, that is down from the 252 deals worth USD 8.4bn in the year-earlier period.
The largest tech deal was Thoma Bravo’s USD 1.3bn acquisition in January of Magnet Forensics [TSX:MAGT], a provider of analytics software for digital forensics research.
Dealmaking in the sector is expected to continue as valuation gaps narrow, said an M&A lawyer focused on the technology industry. One target area is artificial intelligence (AI), especially as Canadian AI startups need to raise about USD 500m if they want to continue competing in the global race for AI domination.
Mid-market galore
Overall, Canada’s M&A market will remain somewhat vibrant although no blockbuster deals are expected for the remainder of 2023 as 21 year-high interest rates make it extremely hard for buyers to line up financing for transactions of more than USD 1bn, the tech-focused M&A lawyer said.
Only 11 deals of more than USD 1bn in Canada have been announced YTD — two less than in the same period last year and five less than in YTD 2021, according to Mergermarket data.
Indeed, a rising chunk of dealmaking in Canada is expected to take place in the mid-market, mostly involving family-owned or closely held businesses, an M&A banker said in April. Nearly 30% of the country’s M&A deals year-to-date fell in the USD 50m-USD 500m range, up from its five-year average of 27%, Mergermarket data shows.
Analytics by Izaz Ansari
