Torys' special edition bulletin, Top 10 M&A Trends for 2008, predicts that the much-changed M&A market will regain some of its steam this year. Gone will be the Wild West-style dealmaking of early 2007, which was fuelled by cheap and easy debt.
“I think in big picture terms we do see somewhat of a slowdown in 2008 compared to 2007, and there won't be as many deals and there certainly won't be as many large deals,” Phil Brown told The Globe and Mail, which reported on Torys' bulletin. “However, I didn't see the frenzied part of the cycle as the norm. A normal market is a sustainable one.”
After a couple of lean months, M&A activity started to pick up in November. Since then, the impact of the credit crisis has become evident in the terms being sought by both buyers and sellers, says Sharon Geraghty. "Given all the circumstances that have happened, there's going to be a real shift in the way transactions take place." Sellers, for example, want more guarantees that their deals will go through. They have become more likely to sign on with a buyer and then look for other potential bidders through a "go-shop" provision rather than encourage a more risky auction process.
Other 2008 trends include a pickup in the acquisition of foreign assets by Canadian companies whose buying power has been bolstered by the high dollar. Foreign buyers from booming economic regions, including China, India, Russia and the Gulf states, will also be active this year.
A hot area will likely be the infrastructure market, where governments are becoming increasingly receptive to tapping the private sector to help replace aging assets such as roads, ports and power lines, says Krista Hill. "I think with the tightening of the credit market ... a flight to quality is happening right now. Strong infrastructure businesses are characterized by stable cash flows and long-term inflation indexed returns ... all the stuff that banks like to see."