In 2007, the number of completed Canadian M&A deals topped 2,000 transactions for the first time, resulting in a total deal value of US$268.6 billion according to an analysis conducted by KPMG Corporate Finance based on data supplied by Thomson Financial.

In Canada, 2,098 deals were completed last year representing an increase of 16% in number and a staggering increase of 50% in value over 2006. The value of M&A deals in 2007 was triple the amount completed in 2005. Despite credit market concerns and a relatively quiet third quarter, the year ended up with some of the biggest deals coming together in the last quarter. Canadians fared well in the biggest deals of the year, being successful acquirers in four of the top 10 Canadian deals.

The largest completed deal in 2007 was the acquisition of Alcan by Rio Tinto with a deal value of $37.6 billion, followed by the sale of Thomson Learning to private equity groups OMERS Capital Partners and Apax Partners.

Canadian companies completed 527 foreign acquisitions valued at US$72.4 billion and 1,086 domestic acquisitions valued at US$63.6 billion. The number of foreign takeovers of Canadian companies amounted to 485, about 23% of all Canadian M&A activity by number, but approximately 49% by value or US$132.6 billion.

“Resource transactions continue to dominate the largest Canadian M&A deals” says Peter Hatges a corporate finance partner with KPMG in Toronto. KPMG predicts the trend for resource transactions will continue, despite lingering concerns about an economic slowdown in 2008. The rate of urbanization in developing countries is expected to continue to fuel demand for raw materials and resources making for a relatively vibrant M&A market in resources.

KPMG expects one of the big catalysts for 2008 will be “value deals”.

Hatges says, “There has been some more sensible pricing discipline in the market recently due, in part, to more conservative debt capital markets. This will pull in the boundaries of purchase price multiples but will lead to more conservative capital structures to deal with the anticipated volatility in the economy. After a truly stellar deal-making year, Canadian and North American companies generally, will have to face up to a new reality in 2008 which is expected include tighter credit markets. We’ve lowered our expectations for 08 accordingly, but the basic fact of the matter is that many Canadian companies do not have the luxury of standing still.”