Canadian companies may opt for mergers instead of initial public offerings after some IPOs slumped this year, said Daniel Daviau, Canaccord Genuity’s head of investment banking.
“There’s a lot of risk with IPOs,” Daviau said today in Toronto at an event hosted by Canada’s Venture Capital & Private Equity Association. “Of the ones that have been completed, there’s been some ones with pretty dismal performance.”
Offerings this year including Athabasca Oil Sands Corp., the country’s largest IPO since 1999, have fallen in value while others, such as MEG Energy Corp.’s sale, have been cut in size. Shares of Calgary-based Athabasca have plunged 27 percent since they began trading on the Toronto Stock Exchange in April.
Lulu Ltd., a self-publishing company led by Red Hat Inc. co-founder Robert Young, postponed its IPO in April, while Porter Aviation Holdings Inc. delayed its offering in June.
Companies have raised about $5.4 billion in IPOs in Canada this year, the most since 2006, according to Bloomberg data. At least 12 offerings have been withdrawn or postponed this year.
“It’s just too risky a strategy right now,” said Daviau, a managing director at the firm owned by Toronto-based Canaccord Financial Inc., Canada’s largest independent brokerage by assets. “That drives companies into the natural M&A alternative.”
Canadian companies have been involved in 1,838 mergers and acquisitions announced this year valued at $135.8 billion, according to Bloomberg data. That’s the best year since 2007, when $332 billion in deals were announced.
Canaccord Genuity ranks 23rd for arranging takeovers involving Canadian companies, with 17 deals valued at $2.8 billion.