Despite the ups and downs of trade negotiations and market uncertainty in the final months of the year, Canada saw a strong market for mergers and acquisitions in 2018. Helped by abundant capital and a growing economy with low unemployment, aggregate deal value was up 20% over 2017, and the volume of transactions rose by 8% (2,395 deals in 2018 versus 2,222 the year before).
With Canada embarking on major legal change with the legalization of recreational cannabis in October 2018, it’s no surprise the healthcare industry was among the top sectors for deal activity in 2018. In May 2018, Aurora Cannabis Inc. announced its plan to acquire MedReleaf Corp. for US$2.1 billion. Other big deals in 2018 included Constellation Brands Inc.’s US$4 billion investment in Canopy Growth Corp. and a move by Altria Group Inc. later in the year to invest US$1.8 billion in Cronos Group Inc. Overall, deal volume in the health care sector rose by 87% over 2017.
The financial services industry also saw a significant rise in deal volume (up 31% over 2017), followed by the technology sector (up 29%). The two biggest technology deals were Blackberry Ltd.’s acquisition of Cylance Inc. for US$1.4 billion and Motorola Solutions Inc.’s purchase of Avigilon Corp., a Vancouver-based maker of surveillance systems, for US$1 billion.
One notable trend was the increase in deals valued at more than US$1 billion in 2018. There were 45 such deals last year, up from 32 in 2017. Much of the mega-deal activity reflects both domestic and outbound transactions involving Canadian pension funds in areas like real estate, private equity and infrastructure. One company, Brookfield (including its subsidiaries), was a player in five of the 45 mega deals. In the largest Canadian deal of the year, an investor group led by Brookfield Business Partners LP acquired Johnson Controls International’s power solution business for US$13.2 billion.
Outbound deal activity was strong despite questions for much of the year about the fate of the North American Free Trade Agreement (NAFTA), negotiations and concerns about tariffs and protectionism. Canadian companies showed an appetite for businesses based in both the United States and elsewhere in the world, which drove a 17% increase in outbound transactions in 2018 (as compared to a 4% rise in domestic deals).