Some of the last megamergers announced in 2017 could offer a clue as to where deal activity will pile up this year.
Walt Disney Co.'s blockbuster $52.4-billion (U.S.) purchase of Rupert Murdoch's Twenty-First Century Fox in mid-December highlighted the theme of investment where technology is shaking up staid businesses, as tech companies such as Netflix Inc., Apple Inc. and Amazon.com Inc. vie to control content that consumers will pay for. This added to the record number of deals worth about $3.6-trillion done globally in 2017, according to data from Thomson Reuters.
This is one of a few key themes for 2018 that Bruce Rothney, chief executive officer of Barclays in Canada, expects more of in 2018. "The big thing we're seeing – which is dictating the different types of M&A deals, whether you're in retail or banking or other industries – is that every industry seems to be under siege by the new digital players," Mr. Rothney said. He added that many businesses are either investing in new technology or otherwise preparing for the arrival of larger tech players in Canada by buying rivals.
The largest deal announced and recorded in Canada last year also had a link to this sort of disruption: Brookfield Property Partners' unsolicited $14.8-billion cash-and-stock bid in November for the portion of Chicago-based GGP Inc. that it doesn't already own. GGP is a mall operator in most of the U.S. states – with a strong presence in New York, Florida and California – at a time when the retail real estate industry is grappling with the rise in online shopping. But this deal is still being negotiated; GGP has yet to accept the offer and the ultimate price Brookfield would have to pay for the asset is unknown.
Goldman Sachs led the rankings for mergers and acquisitions that were announced in 2017, working on 26 deals valued at $70.9-billion, according to Canadian data released on Thursday by Thomson Reuters. JPMorgan Chase & Co. and Morgan Stanley rounded out the top three financial M&A advisers.
Bidding has continued to be aggressive in sectors such as real estate and infrastructure, even as deal valuations have seemed lofty, Mr. Rothney says. He expects that some investors, such as sovereign wealth and other institutional funds, could rotate back toward mining and other natural resources in the coming year. "If you're a pension fund or another investor and you take a long-term view that copper, or iron ore or other similar mining resources are slowly reflating now, then probably this is an interesting time to get either into the physical commodity, or through … shares of the largest strategic players," he said.
RBC Dominion Securities led the rankings in stock sales last year with $8.7-billion (Canadian) in deals, excluding self-funded deals, with TD Securities and BMO Nesbitt Burns Inc. in second and third position, respectively. Proceeds from Canadian equity issuance fell by 21.9 per cent in 2017, when self-led deals were stripped out, amounting to $39.9-billion. But there were 370 issues in 2017, which represented a small increase in deals. The energy and power sectors dominated the flow of equity issuance, accounting for nearly half of the proceeds at $18.3-billion.