Bureau van Dijk, a private business intelligence advisory company, in conjunction with the Alliance of Merger & Acquisition Advisors, recently released its North America M&A Report for Q3 2014 which analyzed North American M&A activity valued at US$5 million to US$500 million for the period of July to September 2014. Data from the report shows that North American mid-market M&A activity for Q3 increased when compared to the same quarter of the previous year, with particularly substantial gains in Canada.

Mid-market M&A activity on the rise in Canada

Canadian mid-market M&A activity grew significantly in Q3 2014, with a 38% increase in value and a 26% increase in volume as compared to Q3 2013. These increases outpaced U.S. performance for the same period, which nonetheless displayed notable gains of its own, with a 36% increase in value and an 18% increase in volume.

The data from Bureau van Dijk is consistent with Ernst & Young’s October 2014 Canadian Capital Confidence Barometer, which projects that mid-market momentum will continue to drive gains in M&A activity, both in Canada and globally.

Notable increase in PE/VC activity

Canadian mid-market M&A growth is partly attributable to an uptick in private equity and venture capital activity (collectively, PE/VC activity). In the mid-market space, Canadian PE/VC activity increased by 74% in terms of volume, from 27 deals in Q3 2013 to 47 deals in Q3 2014, and almost doubled in terms of value, from US$324 million to US$637 million for the same period.

Driving forces behind increased mid-market M&A activity

KPMG attributes increased activity in Canadian mid-market M&As to the following five reasons:

  1. an aging population, which has caused owners of private businesses to assess succession plans, thus creating new M&A opportunities;
  2. strong debt capital markets, which has increased average available debt levels and held down interest rates;
  3. expansion of private equity fund raising, which is coming off a record year in 2013;
  4. strong public company valuations, which generally signifies increased economic confidence; and
  5. limited GDP growth, causing more companies to include M&As in their strategic growth plans.