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Canada's Energy and Mining Sectors Poised for M&A Surge in 2024

The energy and mining sectors are set to drive a rebound in Canada’s mergers and acquisitions (M&A) activity in 2024 after a lackluster 2023 in which rising interest rates hampered deal-making, banking industry executives told Reuters

Last year, deal-making activity in North America and globally dropped amid uncertainties about the economy. 

Canadian deal-making was off to the slowest start since the same period in 2020, PwC said in the middle of last year. 

“The slow start in 2020 was largely due to uncertainty around the pandemic, but in 2023 we’re seeing some financial uncertainty,” PwC’s experts wrote. 

Between January and May 2023, there were 1,218 deals in Canada with a total value of $85 billion, down by 17% in terms of volume compared to the same period in 2022, though up by 10% in terms of value because of some large deals.

In the whole of 2023, the value of all M&A deals in Canada fell by 27% year-on-year to $183.9 billion, according to LSEG data cited by Reuters. 

But deals in the energy and power industries reached a five-year high of $70.4 billion last year, a 56% jump from 2022, per the data. 

The top acquisition of 2023 was Glencore’s deal to buy the steelmaking coal business operations of Teck Resources in a $9-billion transaction. Other energy and resources deals included Baytex Energy acquiring Ranger Oil Corporation for US$2.2 billion including debt, Crescent Point Energy buying Hammerhead Energy, and ConocoPhillips buying the remaining 50% interest in Surmont from TotalEnergies for approximately US$2.7 billion in cash. 

In October, Tom Pavic, president of Sayer Energy Advisors, told The Canadian Press “I think you'll still see some more consolidation, for sure. I think there's still going to be some more transactions.” 

At the start of 2024, bankers and analysts continue to believe more energy deals are in the works in Canada. 

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“I think one of the things we did see in 2023 was continued consolidation in the resource sectors, particularly energy,” Mike Boyd, head of Global M&A at CIBC, told Reuters. 

“My sense is that will likely continue as well, driven by the benefits of scale and technology to lower costs and the largest companies targeting the most attractive regions,” Boyd added.  

By Tsvetana Paraskova for Oilprice.com

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