Canadian M&A Plummets to Nine-Year Low in 2020
Mergers and acquisitions north of the border dropped to a nine-year low in 2020 as the pandemic stopped many Canadian companies’ strategies for growth. However, investors anticipate an uptick in deal-making in the fourth quarter will revive activity in the new year.
With the administration of COVID-19 vaccines around Canada in 2021, observers expect public confidence in an economic recovery to improve. This confidence will drive more deal-making, bankers believe. Market stability and continued access to capital led to a resurgence in deals in the second half of 2020. Observers expect the trend to continue.
Canadian Deal Statistics
Companies announced only some $158.7 billion worth of M&A deals in 2020, making it the slowest year since 2011. In 2019, there was $234 billion worth of M&A deals, according to data from Refinitiv.
After COVID-19 put everything on pause, the focus shifted to restructuring transactions. David Savard, head of M&A at National Bank Financial, a subsidiary of National Bank of Canada, told Reuters.
“There were a few others that were in the pipeline that ended up going through a bit of a difficult period with some renegotiations due to COVID,” Savard went on to say.
Nearly $80 billion of the total Canadian deals announced in 2020 came in the fourth quarter. This was the most active fourth quarter in at least five years, according to the data.
Reuters said that three companies took the top three spots in the advisory rankings. They were CIBC World Markets Inc, Goldman Sachs & Co and RBC Capital Markets.
Intact Deal Leads Canadian Recovery
Transactions in the financial sector led the Canadian recovery in 2020.
In November, Intact Financial Corp. agreed to buy the Canada, UK, and international operations of London’s RSA Insurance Group Plc as part of a $9.4 billion Deal. Intact had spent the past 10 years acquiring its rivals to become Canada’s largest property and casualty insurer. Intact’s workforce will jump 63% to roughly 26,000. The company said that after the merger is complete, its specialty-insurance business will grow by 30%, and it will also start looking at the regulatory environments in the UK, Ireland and Denmark—new areas for the Canadian insurer.
Intact distributes insurance in Canada under the Intact Insurance brand through a network of brokers, including its wholly-owned subsidiary BrokerLink, and directly to consumers through belairdirect. Frank Cowan Company, a leading managing general agent, distributes public entity insurance programs including risk and claims management services in Canada.
Intact in the United States
In the United Staters, Intact Insurance Specialty Solutions provides specialty insurance through independent agencies, regional and national brokers, wholesalers and managing general agencies. Insurance company subsidiaries of Intact Insurance Group USA, LLC, underwrite these products.
The insurance company has $10 billion in total annual premiums.
A group of Canadian businessment founded Intact in 1809 by forming the Halifax Fire Insurance Association. A Dutch insurer that eventually became part of ING acquired that company in the 1950s. In 2009, ING divested its 70% stake in ING Canada Inc., which changed its name to Intact.
One analyst commented that the asset management sector was much more active in the second half of last year and that this trend should continue in 2021.