Despite the still struggling U.S. economy, Canadian deal-making in the United States hit a record high in 2011, according to a recent report from PricewaterhouseCoopers.
The late November report notes that Canadian companies were involved in 385 acquisitions of U.S. firms, worth more than US$22 billion. This marks a record year for Canadian deal volume in the U.S., the report says.
The report, which covers the year to date, ending November 14, notes that “for the first time in history, the value of deals completed by Canadians in the U.S. [was] higher than those completed by U.S. entities in Canada.” Canadian acquisitions in the U.S. exceeded U.S. acquisitions in Canada by a ratio of 1.16 to one.
The report refers to several “drivers” behind this increase. It notes that, while currency levels are an “accelerator” of Canadian activity in the U.S., other factors are responsible for current levels of cross-border activity.
They include a market that offers many more large acquisition targets, as well as targets in a wider range of sectors than are available in Canada.
PwC also cites the relative safety and predictability of the U.S., compared with risks in other regions, ranging from expropriation to government bribery to violent social unrest. Compared with such potential landmines, “slow growth in the U.S., with the potential to participate in a steep turnaround, suddenly doesn’t sound that bad!” the report says.
In addition, PwC notes that volatility in public stock markets is helping to make private equity acquisitions more appealing for pension funds and other institutional investors.
It also notes that the U.S. remains a stable source of “commercially reasonable deal capital” with high yield and leveraged loan markets that are far more stable than those in Europe, for example.