Canadian Lawyer

LEGAL REPORT/M&A Brighter outlook for M&A Weakening Canadian dollar and refocusing of mid-market players could spark an uptick but don't expect a surge in 2014. W hen you talk to merger and acquisition lawyers about the big deals of the last year everyone tends to rhyme off the same ones involving Canada's retail giants. They will then remark that yes, most Canadians who read the business pages could recite them back to you. Oh, and yes, they can be counted on one hand. Real estate, food, and retail were hot in 2013 with Sobeys Inc.'s $5.8-billion purchase of Safeway Inc.'s Canadian assets and Loblaws Inc.'s $12.4-billion acquisition of Shoppers Drug Mart Corp. stores at the top. There was also Ares Management LLC/ Canada Pension Plan Investment Board's purchase of Neiman Marcus Group Ltd. LLC for $6.1 billion and the Hudson's Bay Co. acquisition of Saks Inc. for $2.7 billion. "Retail helped the second half of 2013 look pretty good," says Mark Adkins, a New York-based partner with Blake Cassels & Graydon LLP who helps American and private equity groups find investment targets in Canada. He agrees it was a tough year and doesn't have much optimism for 2014. "What you saw in 2013 were a number of mega deals so the total deal value looked pretty good but deal volumes are still down. For our business the mega deals are great but so much of Canadian M&A is mid-market — 90 per cent of deal volume is in the mid-market. It may look like a happy story but in terms of the legal profession — for bankers and lawyers — the volume is almost as important a number." According to PwC Canada, despite a 62-per-cent increase in M&A activity in value terms over the previous quarter, Q2 2013 was the second quietest quarter since Q2 2010. Deal volume was up 10 per cent, the increase being driven by the return of big deals (over $1 billion) and an increase in average reported deal values excluding the big acquisitions. But natural resources — mining and the oilpatch — stayed quiet. While real estate was the top target industry by value in Q2 of 2013, the REITs are also cooling off — a year ago they accounted for a huge portion of activity but that too is changing. That said, lawyers at Norton Rose Fulbright Canada LLP point out pension funds are still interested in real estate assets in the United States, Australia, England, and elsewhere. As well, CPPIB and Ontario Teachers' Pension Plan are looking at agricultural investing. In mid-December, CPPIB signed a deal for the $128-million purchase of a portfolio of Saskatchewan farms from Assiniboia Farmland LP. Looking at the Canadian M&A landscape for next year, even though oil and gas activity is slower it's still a stalwart. "A lot of the work we do is going to be in oil and gas and it will continue to be next year. Mining is off but it will come back," says Adkins. 2014 will be a "back to basics" year for mining says Linda Misetich Dann, a securities and corporate finance partner with Bennett Jones LLP. "There won't be a huge turnaround in the first quarter but there will be some refocusing/repurposing and consolidation in the mid-tier market. Our clients have survived by scaling back where needed," she says. Robert Seidel, of Davis LLP, is focused on the resource space but you can hear www.CANADIAN L a w ye r m a g . c o m F e b r uary 2014 43 Marco Cibola By Jennifer Brown

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