Pension funds keep Canadian M&A activity afloat

CANADA - Canadian pension funds kept mergers and acquisitions (M&A) activity in the country afloat in the third quarter, according to PwC.

A high level of Canadian pension fund deal making during the third quarter "sheltered a broader Canadian market downturn" found a PwC Capital Markets Flash report on quarterly deals.

The third quarter saw 756 Canadian M&A announcements worth close to $51bn. Canadian pension funds accounted for over $15bn of this, an increase of over 40% from the previous quarter. This increase in pension fund activity pushed private equity's proportion of the market to a post-crisis high of 41%, PwC said.

Mega-deals represented only 0.94% of all third quarter deals, but contributed 59% to aggregate deal values.

Excluding a small number of large Canadian pension fund deals and other pension fund activity, the value of third quarter M&A was 25% lower than the second quarter.

PwC Canadian deals leader and report author, Kristian Knibutat said: "In essence, large financial institutions and pension fund buying held up the market while the traditional middle market withered and habitual dealmakers in the mining sector stayed on the sidelines."

In September, the Ontario Municipal Employees' Retirement System, one of Canada's largest pension plans, acquired Isle of Man-based V.group, a global shipping services company for $520m. (Global Pensions, 6 September 2011)

Canada Pension Plan Investment Board together with the Public Sector Pension Investment Board and Apax Partners acquired Kinetic Concepts, a medical technology company from BlackRock and others for $6.3bn.