The New Brunswick Capital Markets Report 2013, released this week, was compiled by a master of business administration student at the University of New Brunswick in Saint John, and summarizes the recent trends of province’s capital markets.
The report, discussed in the Times & Transcript on Oct. 17, is the fourth such report in as many years.
Read the full article below.
Company mergers down in 2012: report
Times & Transcript (Moncton)
Thu Oct 17 2013
Byline: John Chilibeck
A fair number of smaller business acquisitions and mergers in New Brunswick last year replaced the blockbusters deals of 2011, a new report shows.
Yesterday, the Financial and Consumer Services Commission released the New Brunswick Capital Markets Report 2013, its fourth such report in as many years.
In the year under review, 2012, there were 19 merger and acquisition deals involving New Brunswick-based companies, worth nearly $216 million. They included New Brunswick companies acquiring other companies and New Brunswick companies being bought out.
The dollar amount pales in comparison to 2011, when nearly $534 million in deals were completed, including the big takeover of Radian6 by Salesforce.com. The figure did not include IBM’s acquisition of Q1 Labs in the same year, as no public information has been made available on the deal. The Federal Communications Commission, which regulates trading in the United States, does not require publicly traded companies to disclose the financial ins and outs of such deals if the bought-out firm is worth less than 10 per cent of the takeover company.
“Mergers and acquisitions tend to happen based on time and place, so when there are companies ready to be acquired, that’s when you tend to see it,” said Jeff Harriman, the commission’s capital markets specialist, in an interview Wednesday.
“There were a couple of IT companies in the market in 2011 that were mature enough that acquisitions were appropriate. If we continue to see the ICT sector continue to grow, I’d expect future mergers and acquisitions are definitely possible.”
One of the biggest deals in 2012 was McCain’s acquisition of 100 per cent of the shares of the Kitchens of Sara Lee, a frozen bakery business based in Australia and New Zealand, from Hillshire Brands for $86 million. In addition to the McCain deal, New Brunswick companies also acquired companies from Ontario worth $60 million and Quebec worth $2.3 million. Finally, New Brunswick companies spent $28.4 million to acquire other New Brunswick companies.
The report noted an increase in exempt markets activity. Funds raised grew from just over $25 million to about $304 million. Many of the investors were not based in New Brunswick, with 14 different U.S. locations invested in the local exempt markets.
Venture capital investments grew from 16 to 23 year over year, while conversely the dollar amount dropped from about $21 million to roughly $8 million.
“What this says to me is more organizations are growing, even though they are small and recognized as viable investment opportunities by venture capitalists,” Harriman said. “These guys just aren’t ready for larger deals yet. Hopefully, the greater the deal flow, the greater the amount of investment funds you’ll see in future years.”
He pointed to major growth in the number of deals completed within the Information and Communication Technology sector, with 18 of the 23 venture capital deals within the ICT field.
New Brunswick companies have fallen far behind similar provinces in the amount of venture capital funding they have been able to attract. Saskatchewan raised over $53 million, Nova Scotia raised $37 million and Manitoba raised $31 million. Harriman said it was essentially every sector but ICT that was lagging.
“If you look at the organizations around the province that have popped up and done hard work, propel ICT, East Valley Ventures in Saint John and Gerry Pond and his team champion the cause for ICT in the province. They have supported it, educated them and we’ve seen the results by the number of firms that are successfully raising money. If we can emulate that in other areas, such as life sciences or manufacturing or wherever, I think we’d see some real progress.”
Caisses populaires loan contributions to New Brunswick businesses continued to grow in 2012. They financed $731 million, an eight per cent growth compared to the previous year. New Brunswick credit unions financed $71 million to New Brunswick businesses, which represents nearly 10 per cent growth.
A third contributor in the debt markets was the Atlantic Canada Opportunities Agency. Ottawa’s contribution decreased by 16.5 per cent from $21.3 million to $17.8 million.
Grant activity showed a drop of 29 per cent compared to the previous year, resulting from a decrease in provincial government grants. Provincial grants decreased from $158 million to $91 million.
The Department of Economic Development contributed $108 million in 2011. In 2012, its contribution dropped to $51.3 million. There was also a decrease in the province’s Regional Development Corporation contribution from $48 million to $38 million. Conversely, contributions from federal agencies increased from $54 million in 2011 to $59 million in 2012.
The report by the commission – formerly the New Brunswick Securities Commission – was put together by Harriman and Shanaz Kamal, a master’s in business administration candidate at the University of New Brunswick in Saint John.
The commission brings together regulatory authorities for securities, insurance, pensions, consumer affairs, co-operatives, credit unions, caisses populaires, and loan and trust companies. It’s an arm’s-length Crown corporation funded by the fees and assessments paid by the regulated sectors.