Sector outlook: Let's make a deal

Sectors in-the-know investors will definitely want to keep an eye on

Inco. ATI Technologies. Intrawest. Falconbridge. Fairmont. Big Canadian names all. And all snapped up by foreign companies in 2006. No wonder people believe corporate Canada is being hollowed out. But, just for the record, Canadian companies are more often the buyer than the seller. Of the 501 cross-border deals in the first three quarters of 2006, 363 foreign-owned companies were taken over by Canadians, according to Crosbie & Company Inc., a Toronto-based specialty investment bank.

The one thing everyone agrees on is the red-hot rate of M&A activity in this country: 1,430 deals worth $187 billion occurred in the first nine months of 2006. That torrid pace is expected to continue well into 2007 and beyond, says Doug Robbins, president of Robbinex Inc., a Hamilton-based business intermediary specializing in mid-sized companies. Why? Big deals beget a larger number of smaller deals, and there were 18 mega-transactions valued at more than $1 billion each during the third quarter alone. “I sense that we're going to see a great deal of activity in the next 12 to 18 months in the mid-market,” says Robbins.

Those in most demand are service companies, “because they can double their revenue without having to make any significant capital expenditures,” says Robbins. On the flip side, capital-intensive businesses, such as printing companies, are sliding off buyers' charts.

Want to cash in on the current wave of activity? The average time it takes to sell a business, including the research put toward making the decision, finding a buyer and closing the deal, is 38.5 months, says Robbins. Better get cracking.