Canadians Bought, U.S. Sold in First Quarter

Canadian companies are becoming the dominant bidders in U.S.-Canada cross-border M&A deals. A strong Canadian dollar, weaker valuations in the United States and the loosening of purse strings in the credit market help to create a buyers’ market, as do perceptions that the United States is still a safe haven (compared to Europe and emerging countries). Other factors are access to cheap deal capital that can be used to boost returns, a larger scale and broader scope of M&A opportunities and a desire to replace public market exposure with private market exposure.

Three out of the four billion dollar-plus deals announced in Q1 2012 were in the energy and utilities sector. The U.S. $1.4 billion purchase of CH Energy Group by Fortis Inc in February of this year led the pack. Fortis, the largest investor-owned distribution utility in Canada, had said last year that it was looking to expand into the United States through acquisitions, and could have as many U.S. assets as Canadian over the next 10 years. Watchtell, Lipton, Rosen & Katz LLP acted as the legal advisor for CH Energy Group, and White & Case LLP acted as the legal advisor for Fortis.

Canadian banks, which were making large buys in the United States in 2010 and 2011, have now shifted their focus to Asia, so there weren’t as many deals in the financial services sector between Canada and the United States in Q1 as there had been in the past.