TORONTO, April 5 (Reuters) - Mergers and acquisitions among Canadian companies are expected to pick up pace after a sluggish first quarter, driven by non-resource deals and a rebound in outbound transactions as pension funds and private equity firms put massive pools of capital to work, according to M&A advisers.
Though uncertainty around the renewal of the North American Free Trade Agreement (NAFTA) has weighed on deal activity in some sectors of Canada's economy, bankers expect a resolution to lift deal volumes.
Meanwhile, changes to the U.S. tax system under President Donald Trump are seen boosting cross-border activity, they added.
Canadian M&A activity in the first quarter of the year dropped to $54.2 billion, down 37 percent compared with a year ago, data from Thomson Reuters showed on Thursday, weighed down by lower energy deals which were the biggest driver of 2017 activity.
Toronto-Dominion Bank, Lazard and Citigroup took the top three spots in the M&A volume rankings for the first quarter, followed by Goldman Sachs, JPMorgan and Bank of America.
Bankers expect real estate and industrials to be in focus this year.
"There's a prodigious appetite from pension funds and alternative asset managers for high-quality global and Canadian assets," said Brian Hanson, chief executive of Lazard's Canadian investment banking division.
Despite rich valuations, Hanson expects pension funds to pursue new investments, adding: "They're going to be very disciplined with respect to quality and valuation."
The biggest deal in the first quarter was the Blackstone Group-led planned $17 billion acquisition of about 55 percent in Thomson Reuters Corp's Financial and Risk business.
Blackstone also agreed to buy Pure Industrial REIT for about $2 billion.
"We're seeing a significant amount of cross-border flows," said Grant Kernaghan, Citigroup's managing director of Canadian investment banking.
"Even in this market where multiples have expanded near historic levels, there's still an opportunity to make money from a private equity perspective," he added.
While PE firms were involved with most of the quarter's biggest deals, U.S. strategic buyers are in a stronger position after the tax changes.
"The U.S. tax cut on a macro level has huge implications for Canadian M&A," said Jeremy Fraiberg, co-chair of the M&A group at law firm Osler, Hoskin & Harcourt.
"With the tax changes, U.S. companies are finding their coffers have more cash and could do more northbound deals as a result," he said.
Among the law firms advising on M&A, Osler came out on top, followed by Weil, Gotshal & Manges and Simpson Thacher & Bartlett. (Reporting by John Tilak; editing by Denny Thomas and G Crosse)