M&A activity slower in 2019 as firms focus on due diligence

The number of Canadian deals declined by roughly 5% in the first half of 2019, compared to the second half of 2018. This is partially due to deal makers placing more importance on due diligence — especially when it comes to the acquisition of technology businesses and assets, the report said.

“The technology may be often unfamiliar to buyers, which means they need more time to fully understand what they’re buying,” the report said.

Identifying and avoiding possible intellectual property problems or patent infringements are other reasons why buyers are spending more time on technological due diligence, PWC said.

“Strong cyber due diligence can be a game changer in the M&A process,” Dave Planques, national deals leader for PwC Canada, said in the press release.

“It can help potential buyers figure out the shortcomings of their target’s cybersecurity practices and the resulting cyber risk while also ensuring that the costs and time required to effectively address these issues are properly priced into the deal.”

The need for more robust due diligence won’t necessarily deter transactions, though, the report said.

The most significant deal in the first half of this year was Newmont Mining Corp.’s US$10-billion acquisition of Goldcorp Inc.

Corporate transactions accounted for 71% of all transactions, including eight mega deals over US$1 billion, the report said. The other 29% were completed by private equity firms and pension plans.