M&A activity slower than anticipated so far this year
June 25, 2013
MISSISSAUGA, Ont. -- North American merger and acquisition activity levels have not yet met expectations in 2013, but conditions are ripe for an increase in Canada, particularly in the logistics sector.
MISSISSAUGA, Ont. — North American merger and acquisition activity levels have not yet met expectations in 2013, but conditions are ripe for an increase in Canada, particularly in the logistics sector.
Doug Nix, vice-chairman of Corporate Finance Associates in Oakville, Ont., told a group of clients this morning, “The first half of the year has been one of the slowest times I’ve seen for completed transactions, but not for interest.”
Nix said many buyers are nervous about economic conditions, citing an example of a transportation and logistics company that has seen its revenues plummet 30% since January.
“These revenue decreases have come out of the blue,” he said. “These surprises make buyers nervous.”
Even so, Nix said many companies are in the early stages of preparing their businesses for sale and there is no shortage of available money to be spent on acquisitions. Nix said in Ontario, private equity firms are sitting on a half trillion dollars that’s looking for a home, and must be invested. He also said corporate balance sheets are for the most part healthy and that lenders are willing to fund acquisitions. There’s also strong demand for quality companies.
“You would think all those factors would make this a strong seller’s market, where valuations are starting to go up, but we’re not seeing that,” Nix said.
In Canada, valuation multiples presently range from 3.5x to 6x EBITDA, with larger companies commanding the higher multiples. Nix said there continues to be strong demand for logistics companies, particularly those with a proprietary element.
“Logistics is an incredibly hot area today,” Nix said. “For freight management companies, I think this year or next year are the best years to sell, because of a number of market forces.”
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