Global survey shows Canadian businesses among the most likely to pursue M&A growth
TORONTO, May 14, 2012
TORONTO, May 14, 2012 /CNW/ - Canada stands out amongst mature economies
in anticipated merger and acquisitions (M&A) activity over the next
three years according to research from the latest Grant Thornton International Business Report (IBR). The results from the 2012 report show that 42% of Canadian businesses
surveyed said they plan to grow through acquisition.
These numbers are consistent with historically high figures over the
past five years in Canada. However, around the world, the IBR results show that business appetite for M&A has markedly increased over
the past 24 months, despite on-going global economic challenges. The
survey reveals that the overall proportion of businesses seeking to
grow through M&A has risen significantly from 26% in 2010 to 34% in
"Naturally, domestic M&A remains high on the agendas of business
leaders, but the upswing in interest in overseas expansion is
encouraging and no doubt reflects the particular market conditions
within individual regions globally," says UK-based Mike Hughes, global
service line leader for Grant Thornton International's M&A practice.
Canadian companies pursuing M&A growth strategies say they are doing so
primarily to access new geographic markets (69%), but also to build
scale (48%), access lower cost operations (39%) and acquire new
technology or an established brand (34%). These kinds of key drivers
are consistent around the world, indicating that Canadian companies
believe M&A remains the simplest and most effective way for businesses
to grow their footprint and build scale in new geographies.
Of those Canadian companies looking to grow through M&A, IBR survey results reveal 70% are looking domestically, while 23% are
looking outside Canada's borders. This stands in contrast to the global
results, which show an overall increase in the number of companies
seeking to expand through a cross-border transaction - from 28% last
year to 33% in the 2012 survey.
"Acquisitions are well-established tools of corporate strategy in
Canada, so it's not surprising that we are comfortably above the global
average in planning to use this as a tool for growth. Canadian merger
and acquisitions activity is being driven by growth-hungry companies in
a tepid economic environment, the ageing population of the Western
world and strong access to funding," says Troy MacDonald, Corporate
Finance partner in Grant Thornton LLP's Toronto office.
Most Canadian companies plan to finance their growth through retained
earnings (68%), bank finance (55%) and private equity (31%). "Despite
the global slowdown, many companies are holding significant cash and
have excess debt capacity on their balance sheets, positioning them
well to make acquisitions," adds Greg Wright, Director of Mergers and
Acquisitions at Grant Thornton Corporate Finance Inc. in Vancouver. "We
believe the time is right for Canadian businesses to take full
advantage of business optimism and the M&A opportunities that exist
across Canada and well beyond our borders."
Despite the appetite for M&A, only 12% of Canadian companies foresee a
change in their own ownership over the next three years, and of these,
31% said they expect an acquisition by a competitor. According to Greg
Wright, many of these businesses may command a premium price. "High
quality businesses are attracting premium prices across the globe, and
particularly in Canada. Slow economic growth over the last few years
has definitely increased competition for attractive assets."
The IBR survey results reveal some interesting regional variations. The regions
most interested in making an acquisition in the next three years are
North America (37%) and the BRIC economies (35%). This compares to only
28% in mainland Europe, 25% in Asia Pacific and in particular companies
in the troubled economies of Greece, Ireland and Spain where only 16%
indicated an interest in M&A activity in the coming three years.
Grant Thornton's Greg Wright (Vancouver) and Troy MacDonald (Toronto)
are available for interviews.
About Grant Thornton LLP Grant Thornton LLP is a leading Canadian accounting and advisory firm
providing audit, tax and advisory services to private and public
organizations. Together with the Quebec firm Raymond ChabotGrant
Thornton LLP, Grant Thornton in Canada has approximately 4,000 people
in offices across Canada. Grant Thornton LLP is a Canadian member of
Grant Thornton International Ltd, whose member firms operate in close
to 100 countries worldwide.
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight
into the views and expectations of 12,000 businesses per year across 40
economies. This unique survey draws upon 20 years of trend data for
most European participants and nine years for many non-European
economies. For more information, please visit: www.internationalbusinessreport.com.
The research is carried out primarily by telephone interview lasting
approximately 15 minutes with the exception of Japan (postal),
Philippines and Armenia (face to face), mainland China and India
(mixture of face-to-face and telephone) where cultural differences
dictate a tailored approach. Data collection is managed by Grant
Thornton International's core research partner - Experian.
Questionnaires are translated into local languages with each
participating country having the option to ask a small number of
country specific questions in addition to the core questionnaire.
Fieldwork is undertaken on a quarterly basis.
IBR is a survey of both listed and privately held businesses. The data
for this release are drawn from interviews with 12,000 businesses
across the globe conducted between January and December 2011. The
target respondents are chief executive officers, managing directors,
chairmen or other senior executives (title dependent on what is most
appropriate for the individual country) from 40 economies primarily
across five sectors: manufacturing (25 per cent), services (25 per
cent), retail (15 per cent) and construction (10 per cent) with the
remaining 25 per cent spread across all sectors.
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