- The Canadian dollar will remain strong, but in the long
run, par is likely not sustainable once the United States
addresses its federal spending and credit market issues.
There is now a window for US southbound deals to be done by
Canadians, particularly in areas where valuations have fallen
dramatically, such as real estate and real estate intensive
industries like retail and financial institutions.
- Income trust conversions will lead to every board
evaluating possible sale or merger opportunities. These are
most likely to occur where strong market fundamentals can
continue to support trust-like valuations. We will also see
some of these trusts go private to avoid public company costs
and scrutiny once their valuations drop to pre-trust
levels.
- Forestry, automotive-related companies, and some
manufacturing businesses dependent on a weaker Canadian
dollar will struggle and will be a source of M&A, and
some of them will almost certainly have to seek CCAA
protection.
- Private equity will be more careful and be increasingly
preoccupied with workout issues in their investee companies.
At the same time, many companies in Canada, particularly in
the mining sector, have huge cash balances, shifting the
balance to strategic buyers (companies in the same sector
that can achieve efficiencies through M&A) over financial
buyers (private equity).
- Power projects of all kinds (nuclear, clean tech, etc.)
will continue to attract capital.
- Global players will increase their interest in Canadian
public companies that produce food ingredients, such as
grain, or food related products, such as potash.
- Companies with exposure to nuclear power, whether it be
in development of plants (Bruce Power) or producing inputs
like uranium mining, will attract interest.
- Canadian mining companies will continue to be seen as
cheap long-term investments by countries needing basic
economy-building materials such as steel, copper, and
zinc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
