TORONTO — Chinese investment funds and state-owned enterprises will become increasingly important players in Canadian merger and acquisition activity and will focus their sights on larger companies, experts say.
Although M&A activity has edged up throughout 2009 as credit has become easier to get and investor confidence has improved, many Canadian companies are still reluctant to undertake a major deal in a struggling economy.
Because of this, state-owned companies and private investors from developing countries — particularly China, but also India and others — will become increasingly important suitors.
“We think the ongoing interest of particularly Chinese (state-owned enterprises) and investment funds . . . in some of our resource plays is going to continue,” said Andre Hidi, executive managing director and head of global mergers and acquisitions at BMO Capital Markets.
Hidi, speaking Monday as part of a panel discussion on M&A activity hosted by the Conference Board of Canada, said it’s unlikely a Chinese company would target the very top tier of Canadian resource companies because the bid would probably be thwarted by the Investment Canada Act.
However, he said there are many second-tier companies, particularly in the oilsands sector, that could be targets, including Talisman Energy Inc. (TSX:TLM) and Nexen Inc. (TSX:NXY), both of which have operations outside Canada.