TORONTO, Jan 9 (Reuters) - Royal Bank of Canada led investment banks in advising on equity issues and mergers and acquisitions in Canada in 2013, but share issues overall rose only slightly in the year and M&A activity fell hard.
In a year in which gold prices plunged and base-metal and oil industry activity was hit by uncertainty over global economic growth, the total value of M&A deals in 2013 fell by 31 percent to US$144.7 billion, according to data released by Thomson Reuters on Thursday.
"We saw a pretty significant decline in activity in both the energy and mining sectors, which have over the last five to 10 years accounted for half to two-thirds of the Canadian M&A market," Peter Buzzi, co-head of M&A at RBC, told Reuters in an interview.
Equity issues were dominated by a few large deals, with Barrick Gold Corp's C$3.1 billion ($2.87 billion) secondary offering a standout in an otherwise quiet mining sector. Stepping in to partially fill the gap on the M&A and new issues side were retail and real estate players.
All told, data showed banks completed 340 equity deals worth C$34.2 billion, up from C$32.2 billion in 2012, according to Thomson Reuters league tables for 2013.
RBC, which is typically at, or near, the top in all banking categories, led in both M&A and in equity issues, including initial public offerings.
The bank, Canada's largest, advised on 57 M&A deals with a total value of US$32.6 billion, leading for the second straight year and working on deals such as grocer Loblaw Cos C$12.4 billion takeover of Shopper's Drug Mart Corp and the US$6 billion purchase of Neiman Marcus Inc by two pension plans.
RBC also was the clear leader in debt issues in 2013 as low interest rates and favorable market conditions led to a banner year for corporate and government debt in Canada in 2013.
Bank of America Merrill Lynch and Morgan Stanley were also strong on the M&A side, advising on US$25.9 billion and US$23.8 billion, respectively, while Goldman Sachs slipped to fourth from second a year earlier, advising on US$17.2 billion. Bank of Nova Scotia was the next Canadian bank after RBC, advising on US$17.0 billion.
All told, 2,488 acquisitions were counted last year in Canada. The total value of US$144.7 billion paled next to US$208.5 billion in 2012 and was the lowest total since 2009, despite strength in retail and real estate.
With interest rates still low, executives said they expect real estate activity to remain strong in 2014, while activity on the resource side - typically the driver of Canadian M&A - will take its cue from the economy as bankers say would-be buyers are sticking to the sidelines, waiting for signs of strength.
"I think as long as we continue to have an improving global economy, which appears to be where things are trending, I think would should see improvement in the commodity sectors, both in terms of energy and mining," said Mike Boyd, head of M&A for CIBC World Markets, part of Canadian Imperial Bank of Commerce .
On the gold side, where confidence has been shaken by soaring mining costs and a 28 percent decline in the metal's price last year, the possibility of more weakness could lead to more deal flow, he said.
"If the gold price... continues to decline, I think there will be a need amongst the gold companies to increase their scale, reduce costs, deal with the margin pressure they're facing, which I think will probably drive some consolidation," Boyd said.
Top law firms advising on M&A deals were Torys, which guided US$38.8 billion in deals, Davis Ward Phillips & Vineberg, which advised on US$31.8 billion in deals, and Osler Hoskin & Harcourt LLP, which advised on US$30.6 billion.
Bankers expect a stronger year for equity issues in 2014, although they don't necessarily see the Barrick C$3.1 billion offering jump-starting activity in the gold sector as worries persist about emerging-market growth and the impact of the U.S. Federal Reserve's tapering of its stimulus program.
RBC, at C$5.3 billion, led all banks in 2013 in advising on Canadian stock sales, while Bank of Montreal was second at C$4.7 billion, and Toronto-Dominion Bank third at C$3.3 billion.
Despite the slump in M&A activity last year, three of the biggest equity deals involved major takeovers, including Valeant Pharmaceuticals' $8.7 billion takeover of Bausch & Lomb and Empire Company Ltd's C$5.8 billion acquisition of grocer Canada Safeway.
Peter Miller, head of BMO's Canadian equity capital markets business, said he expects that trend to continue, with a busy M&A pipeline driving stock issues in 2014.
IPOs jumped to their highest level in three years, at C$3.3 billion, up from C$2.5 billion in 2012, led by real estate and energy deals, and helped by rising equity markets.
Miller said he sees technology, financial services and industrials as areas to look for IPOs in 2014.
"These are all sectors that are most leveraged to North American economic growth. That's where investors want to be, those are the sectors that are performing the best and that's where we're going to see the flow," he said.