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Canada M&A sets record for quarter on cross-border deals, easy money

TORONTO, April 7 (Reuters) - Canadian M&A activity in the first three months of the year catapulted to an all-time high as dealmaking recovered from the coronavirus fallout, and bankers point to a healthy pipeline of transactions underpinned by easy financing conditions.

The novel coronavirus dragged mergers and acquisitions (M&A) down to a nine-year low in 2020 as companies switched to cash preservation mode. But the rollout of vaccines and an expected economic recovery is reviving confidence among companies to strike deals, especially in the United States.

“These are definitely the busiest times I’ve seen in my 25-year career,” said Grant McGlaughlin, partner at law firm Fasken. “I don’t think you can last at this pace for the whole year but hopefully Q2 and Q3.”

The quarterly M&A tally hit an all-time high of $114.91 billion in the first quarter of 2021, according to data from Refinitiv. Companies raised C$19 billion ($15.2 billion) through share sales in the first three months of the year, the highest since the fourth quarter of 2010.

Mike Boyd, managing director and head of global mergers and acquisitions at CIBC, said he does not think he has ever seen capital markets as conducive to M&A as they are right now.

“If you look at the debt markets in particular, you have record low interest rates, and we’ve also got...strength in market capacity,” to absorb the deal size, he said.

Boyd expects M&A activity to remain high thanks to low interest rates and a strong economic recovery that will remain in place for the next couple quarters at least.

OUTBOUND RUSH

Bank of America Corp’s BofA Securities Inc, Bank of Montreal’s BMO Capital Markets and Toronto Dominion Bank’s TD Securities Inc made up the top three banks for M&A, the data showed.

Canadian Pacific Railway Ltd’s $25 billion bid for Kansas City Southern and Rogers Communications Inc’s C$20 billion deal for Shaw Communications Inc topped the deals list.

Bill Quinn, head of M&A at Toronto Dominion, said while Canadian investors looking outside of Canada had tapered off last year because of the pandemic, we’re now seeing a “return to normal”.

The first quarter of 2021 saw nearly $50 billion in outbound deals, the second biggest quarter on record, with about half coming from the CP transaction.

“In terms of Canadian M&A, we are seeing stronger growth in our market versus the U.S.,” said Sarfraz Visram, head of M&A at BMO Capital Markets.

U.S. M&A activity rose 12.2% to $869.35 billion in the first quarter of 2021 from fourth quarter of 2020, while Canada M&A recorded 44.4% sequential growth in the same period, Refinitiv data showed.

“We’ve now clearly turned the corner,” said Emmanuel Pressman, partner at law firm Osler. “It’s in part the renewal of confidence in cross-border M&A flows, both inbound and outbound.”

$1 = 1.2536 Canadian dollars Reporting by Maiya Keidan Editing by Denny Thomas and Lisa Shumaker

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