Q-News
March 2010
Posted in Mike's Commentary
Good news on the M&A front with just published 2009
results showing that we ended the year with a very strong quarter. Crosbie & Co. reported that the number of
fourth quarter transactions increased by 18% year-over-year with 254
transactions totalling $32.9 million versus 216 transactions worth $19.9
million during the same period in 2008. Importantly, Q4 represented the third
straight quarter of increasing activity.
For the year, early numbers indicate that a total of 837 transactions
worth $1.348 trillion were completed, representing a 27% decrease from the 2008
transaction volume of 1,152 deals but an increase of 23% over 2008 transaction
value of $1.097 trillion.
A second source, Mergermarket, reported that Q4 activity
increased by 81% while total year transaction value was down by 20.8% and the
number of transactions was down by 14.2%.
A strong fourth quarter saw the number of transaction increase by 81%
over the first quarter of 2009 from 65 transactions to 118.
It really doesn’t matter which source you rely on, we all
know that in the first quarter of 2009 we couldn’t be trusted alone with a
sharp knife. However, as the months went
by, day once again followed night and by year’s end all indications appeared to
point to a strong 2010 for Canadian M&A activity.
For those of you who have been on holidays, living under a
rock or have just become immune to the constant bombardment of dismal news emanating
from the Canadian private equity scene, we finally got some positive news. The federal government finally made the
decision to remove the Section 116 tax barrier, which created an immense burden
for foreign investors and certainly was a detriment to attracting foreign
capital.
Along with recent government initiatives, such as the
Ontario Capital Growth Corporation, the formation of Teralys Capital in Quebec, the entry of new players in the Ontario market such as Bridgescale Partners
and new private money flowing into new small funds such as Mantella Venture
Partners, maybe things are beginning to turn the corner.
In terms of the Section 116 changes, I think its great but
let’s face it, from a US VC perspective it is tough to get all jazzed about
your neighbour’s “now open for business” sign when you’re busy fighting your
own fires. Therefore, I’m not going to go
so far as to believe that these changes will have an immediate and significant
impact on our current funding dilemma but it is certainly another positive step
in our long climb back up the hill to prosperity.
Looking back over the many years that we have been issuing
this monthly newsletter we have seen US VC account for as much as 50% of
monthly investments but I can’t really point to a time when they were active in
Series A financings. I suspect that the
elimination of Section 116 will be very helpful to later-stage companies that can
no longer rely on capital from their Canadian investees but early-stage
companies will have to wait for new capital to flow into the sector or wait for
the Canadian VCs to achieve some exits with their new US partners.
A couple of quick notes:
I wanted to congratulate David Crow, Jevon MacDonald and Jonas Brandon
on staging a great Founders & Funders event and also congratulate Robin
Axon and Duncan Hill for raising $20 million and forming Mantella Vanture
Partners. Lastly, Q1 Capital’s M&A
practice continues to grow with our latest transaction being the sale of
WebFeat to Marshall Fenn. Keep posted, there
is more to come! Have a great month.
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