Looking back on the global financial crisis, we often blame mortgage fraud, reckless bankers and lazy regulators for the ruin, omitting that we’re partly to blame for believing empty promises of housing and stock market returns.
Let’s be sure to remember that during the current merger boom.
In 2015, the total value of mergers and acquisitions set a global record, reaching $4.7-trillion (U.S.). Many Canadians failed to notice, because our biggest buyers were domestic pension funds and Brookfield Asset Management, which inked most of their transactions abroad. But they’re now paying attention as blue-chip Canadian companies, such as our biggest banks and pipeline companies, strike deals – the total values of which keep on soaring.
Since Labour Day, Enbridge announced a $37-billion (Canadian) deal to buy Spectra Energy Corp., and Potash Corp. of Saskatchewan Inc. and Agrium Corp. have proposed a merger in a transaction worth $37-billion (U.S.).
The size of these deals alone should give investors pause because they are so close to the largest takeover in Canadian history – Rio Tinto’s ill-fated $38.1-billion acquisition of Alcan in 2007.
That deal, and others inked around the same time, such as Vale’s $20-billion pickup of Inco and Xstrata’s $18-billion purchase of Falconbridge, all blew up, serving as ugly reminders that megamergers are extremely tricky to pull off.
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