The West grabbing a growing share of Canada’s investment capital – by Gordon Hamilton (Vancouver Sun – October 29, 2011)

The Vancouver Sun, a broadsheet daily paper first published in 1912, has the largest circulation in the province of British Columbia.

Strong commodities markets, especially mining, pulling growing volume of M&A activity to western provinces

The Western provinces are taking a bigger share of Canadian business investment as a result of the global commodities boom, a PricewaterhouseCoopers (PwC) report on mergers and acquisitions shows.

Ontario and Quebec continue to be the top investment destination, according to the report Deals Quarterly Special Feature, but the two Central Canada provinces are losing market share to the West. The report looks at merger and acquisition activity province-by-province over the last 10 years.

“There is certainly a shift, a trend,” Kristian Knibutat, PwC Canadian deals leader, said in a teleconference on the report Friday. He said the geographic shift comes as no surprise, given the “super cycle” that commodities have been experiencing over the decade.

The PwC report shows that on the sell side of M&As – companies being acquired – Ontario dropped from 37 per cent of the volume and 47 per cent of the value in M&A activity in 2000, to 32 per cent of volume and 31 per cent of value by 2011.

In contrast, B.C., grew from 17.5 per cent of the volume and five per cent of the value in M&A sell-side activity in 2000, to 20 per cent of volume and 16 per cent of value by 2011.

On the buy-side, however, Ontario has dominated M&A activity. The volume of deals where an Ontario company was the acquisitor, slipped from 44 per cent to 37 per cent, but the value spiked from 41 per cent to 70 per cent.

“Mining has become a No. 1 target sector for each of Ontario and British Columbia,” said Knibutat. “They certainly benefited significantly from the commodities super cycle. In 2000, Ontario and B.C. had about seven or eight per cent each activity in mining. Today, the percentages for Ontario would be closer to 20 per cent and for B.C., 54 per cent.

“That’s driven in a large part by the fact that both Toronto and Vancouver are global capital market centres and recognized as such for the resource industries, and mining has become the No. 1 targeted sector in both of these provinces.” Knibutat added, however, that much of the deal-making takes place outside of Canada.

“A lot of the assets acquired are often in foreign jurisdictions,” he said. “There’s a lot of deal-making activity in the commodity-driven space and a lot of deal-making activity outside of Ontario and outside of Canada.”

Knibutat noted there has been a decrease in activity in the shale gas sector, largely because of the weak overall economy and technological changes in gas extraction that have lowered the price of gas in North America.

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