A stock photo of Canadian paper bills.
Thinking of buying a Canadian company? Expect to pay cash, and more of it, than any time since 2011.
Acquisition multiples for Canadian companies have reached the highest in three years, and the percentage of takeovers paid with cash is on the rise, an analysis of deal data shows.
So far this year, there have been 126 takeovers of Canadian companies worth more than $25-million. Buyers are paying an average of 8.4 times earnings before interest, taxes, depreciation and amortization (EBITDA). The average deal is worth 2.2 times the target's multiple. Almost four-fifths of consideration was cash.
In 2013, the average EBITDA multiple was 7.3 times, and the revenue multiple stood at 2.1, according to Bloomberg. in 2012, the numbers were almost identical.
The figures suggest what one would expect – cheap financing, cash-rich buyers and strong equity markets are combining to drive up prices and create more of a seller's market.
All the usual caveats apply: mainly that mergers are lumpy and one big transaction can skew data easily, and that depending on what sectors the mergers have been in, that can also affect multiples.