How Bad is the Big Deals Drought?

July 4 — This month’s issue of Lexpert includes an astonishing little table on blockbuster deals, and the numbers go a long way to explaining the M&A malaise that deal lawyers are feeling right now.

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The table ignores total deal volume to focus only on the biggest, highest-profile transactions — the kinds of deals a corporate lawyer can build their reputation on.

The data comes from Thomson Reuters (publisher of Lexpert). We included all deals valued over $500 million involving Canadian legal counsel (whether inbound or outbound). We did not include any arm’s length or subsidiary transactions, nor any procedural share repurchases … so basically just the crème de la crème.

The chart highlights the most valuable deals. There may only be half a dozen of these per month in Canada — or, at least, there used to be. A quick look at the numbers show a precipitous decline.

Last year, between January 31 and May 1, 18 of these “blockbuster” deals were announced, valued at $26.18 billion. … One year later, the drought (or famine, depending on the firm) is plain to see. Over the same period, only six blockbusters were announced, worth a paltry $4.1 billion. That’s a drop in value of 84%.

Of course, there are deals besides blockbusters, and smart firms are leaning on these to keep revenue up. In a report this month, Norman Steinberg, global co-chair of Norton Rose Fulbright LLP, points to real estate.

“I think this is a very important trend because when you look at the low interest-rate environment, a lot of pension funds and sovereign funds need to do better than investing in bonds and equities, so they’re expanding in real estate.“The Caisse is buying up real estate around the world. OMERS announced a major joint venture in London. You look at Australia, and who are the big buyers? The CPP, which is doing major projects. The Caisse is entering that market as well. So I think there’s going to be major activity in real estate. It’s a very attractive asset sector for pension and sovereign funds.”

Deals in the food sector are also showing positive growth, says Steinberg.

“Sovereign funds from the Middle East, in particular, have been going around the world looking at where they can buy things in agriculture — either companies or land — in places like Australia and Canada and Africa. They want to guarantee their food supply.”

You can read Sandra Rubin’s full report in the July/August issue of Lexpert right here.

-David Dias

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