Domestic energy-sector M&A in Canada saw a significant
decline in the number of transactions in 2015 as private equity
increasingly pursued dealmaking in the Canadian retail and consumer
products sector, alongside steady activity in technology,
industrial and natural resources sectors (Figure 1).
The decline in energy-sector M&A was largely due to weak
industry fundamentals and depressed public company share prices
that often made buy side and sell side expectations difficult to
reconcile. This was compounded by market uncertainty about the
potential impacts of policy initiatives of the recently elected
provincial NDP government in Alberta—initiatives that include
a provincial energy-sector royalty review, a higher corporate tax
environment and new commitments to climate change legislation. With
the Alberta government having released the results of its royalty
review in late January 2016 and deciding largely to maintain the
existing royalty structure, some of this uncertainty should be
Market access continues to be a significant concern for the
industry given the political headwinds that have impacted proposed
pipeline projects to date. In early February, in his first visit to
Alberta since assuming office, Prime Minister Trudeau delivered a
message of federal political support for opening up markets for
Alberta energy through new pipelines; however, the message fell
short of providing assurances regarding new pipeline approvals,
instead emphasizing the need for thorough regulatory review without
undue political interference.
A rise in energy-sector deal activity is anticipated in the
coming year. With the market adjusting to the realities of a more
pronounced oil price decline that isn't expected to recover
substantially in the short term, capital budgets have been slashed
and distressed companies have had few options to consider other
than asset dispositions or other M&A strategies to address
overleveraged balance sheets and the resulting concerns of lenders,
or to raise capital for higher priority projects. In addition,
there has been robust activity with respect to midstream oil
infrastructure asset opportunities as producers look to
monetization strategies around the infrastructure they own in order
to address balance sheet liquidity issues. Both financial buyers
and well-capitalized strategic buyers will look to take advantage
of these opportunities. A relatively low Canadian dollar is also
expected to motivate foreign buyers hoping to find attractive
investments in the current environment in Canada.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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