MONTREAL – With the domestic economy stuck in neutral, the majority of the money spent on acquisitions by Canadian companies went outside the country within the last quarter, according to a report released by Crosbie & Company Thursday.
Cross-border transactions within the second quarter of 2015 represented 42 per cent of all announcements, however, 76 per cent of the total worth of the deals were outside Canada -?the highest level in over five years.
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“The Canadian economy is really stagnant right now. Companies are having trouble generating organic growth and they are looking for other ways to grow,” said?Crosbie & Co. director?Richard Betsalel.
The report says the resource sector contributed to 56 per cent of the overall decline in activity because of low commodity prices, using the energy sector alone visiting 45 percent.
“People are generally hesitant to make acquisitions when they don\’t know in which the bottom is,” said?Betsalel.
However, there were a few large energy transactions involving both strategic buyers and financial players.
Cenovus divested its interest in Heritage Royalty for $3.3 billion towards the Ontario Teachers’ Pension Plan and Apache sold Quadrant Energy to Brookfield Asset Management and Macquarie Capital Group for $2.6 billion.
He states that although more acquirers are keeping away from the resource sector for the moment, at some point information mill going to have to sell as assets become distressed and companies run out of cash.
“There’s going to be a fire sale,” said Betsalel. “Eventually that’s going to translate into M&A activity.”