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TORONTO (Reuters) - Cash-rich corporations and a stable economy will drive mergers and acquisitions in Canada in 2012, and lower commodity prices may spur opportunistic buying of resource companies, a top M&A expert at Canadian Imperial Bank of Commerce (CM.TO) said in a report on Tuesday.
Access to cheap debt should also help spur dealmaking activity in the coming year, supporting increased private equity activity as well as corporate buying, the report said.
"Canada's strong relative economic performance, resource weighting, cash-rich balance sheets, and the strength of our dollar continue to be positives for Canadian M&A activity in 2012," said Mike Boyd, managing director and head of M&A at CIBC World Markets.
Resource-related mergers and acquisitions were also key drivers in 2011, although average deal sizes retreated as the year progressed.
In a sign greater activity could be bubbling under the surface, Polish miner KGHM KGHM.WA announced a roughly C$3 billion ($2.93 billion) agreement last week to buy Toronto-listed copper miner Quadra FNX QUX.TO, which controls one of the world's largest undeveloped copper projects.
The CIBC report said deal sizes could pick up next year, especially if financial markets stabilize.
Also in the report, Andrew Potter, the bank's managing director for institutional equity research, pointed at the potential for more deal flow in M&A and joint ventures in the energy sector, where some valuations are at record lows, while the cost of capital sits near historical lows.
"The only other time that valuations dipped to current levels was during the financial crisis of 2008-09, but a key difference was the lack of credit availability, even for high-quality issuers," Potter said in the report.
Reporting By Pav Jordan; Editing by Peter Galloway