Canadian M&A activity soars on surge in outbound deal flow

By Euan Rocha and John Tilak

TORONTO, Jan 7 (Reuters) - A slew of major bets outsideCanada by some of the country's top pension funds, banks,investment management firms and insurers propelled Canadian dealactivity to its second-highest level ever in 2015.

Thomson Reuters data released on Thursday showed $278.69billion of deal activity involving Canadian entities in 2015, up37 percent from a year ago, and lagging only a pre-crisis highhit in 2007.

JPMorgan, lead advisor to General Electric onthe sale of its finance assets, claimed top spot in the CanadianM&A league tables as big parts of that GE portfolio were scoopedup by Canadian institutions like Canada Pension Plan InvestmentBoard, Bank of Montreal and Element Financial.

"The real story around Canadian M&A activity this year wasthe outbound activity that was up some 175 percent and drove thelion's share of activity" said John Armstrong, head of CanadianM&A at BMO Capital Markets.

Morgan Stanley, Royal Bank of Canada, Bank ofAmerica and BMO rounded out the top five in Canada, withother international banks like Citigroup, Credit Suisse and Barclays, placing high in the rankings.

Among the domestic banks CIBC came in third, and a newplayer, INFOR, emerged as the top independent Canadianinvestment bank.

"The continuing emergence of the Canadian pension funds astop-tier dealmakers on the global stage was solidified in 2015,"said Ron Lloyd, head of Credit Suisse Canada.

"Our pipeline remains very strong," said Barclays Canadahead Bruce Rothney, adding he expects Canadian pension funds tolook at further resource sector investments as commodity priceshover around cyclical lows.

"There will be some creative deals that will get done in theresource space," said Rothney.

The strong M&A data from 2015 shrouded the fact that softcommodity prices have muted resource-sector activity thattypically accounts for a large part of Canadian deal flow. But,bankers now expect weak commodity prices to spur moreopportunistic deals.

"M&A activity in the energy sector is likely to pick up overthe next 12 to 18 months," said David Rawlings, head of JPMorganCanada. "There should be an opportunity to create real franchisevalue for well-capitalized companies."

This in turn has increased optimism around 2016.

"Canada is set up for increased M&A," said Neil Selfe, headof INFOR. "However, global macroeconomic uncertainty and risinginterest rates are likely to have a moderating effect on whatwould otherwise be a vibrant M&A environment." (Additional reporting by Euan Rocha; Editing by MeredithMazzilli)