When it comes to foreign mergers, Canadians buy way more companies than they sell

Domestic firms bought more foreign companies than vice-versa in last decade, prefer raw materials

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Canada’s companies have been prime targets for ambitious foreign firms in recent years — witness Mexican baker Grupo Bimbo’s $1.8 billion offer for Canada Bread, or Mattel’s move to compete with LEGO via a $460 million bid for Mega Brands.But Canuck firms have actually bought more than they’ve sold in the past decade, according to M&A International.

Between 2004 and 2013, Canadians acquired 4,787 foreign-owned businesses, against 3,544 domestic firms flogged to outsiders. The net M&A gap is particularly high in the last five years:

Chart showing M&A activity by Canadian and foreign firms 2009–2013

High-profile corporate battles over the likes of Rona and Allergan may create the impression that Canadian companies are under siege from a horde of ravenous foreign conglomerates. But Canadian firms are clearly holding their own, and Howard E. Johnson, president of M&A International, said the perception gap is caused in part by the media. “When there is a takeover of a major Canadian company, it tends to hit the front pages of the news, as opposed to the acquisition by a Canadian company of a foreign entity, which tends to be more in the business section of the news,” he noted.

Canadian firms have shown a marked preference for stuff over services — over 25% of acquisitions in the past decade has been in the raw materials sector:

Chart showing Canadian and foreign M&A activity by industry 2004–2013

Johnson believes the rebounding U.S. economy and continuing globalization will mean a continued acquisitive frenzy from Canadian firms, with banks and pension plans showing renewed appetite for overseas opportunities. And 2014 could be a banner year for company buying:

Much of the recent M&A activity has involved retailers and consumer products, but the experts are now seeing activity shift back to the resource sector. For years, mining and energy companies have been cutting costs and retrenching; lately investors have been asking where their growth is going to come from, says Paul Knight, vice-chairman at Barclays Investment Bank.

READ: Why 2014 could be the year of M&A for Canadian investors »

Canadian governments have been criticized for having a protectionist attitude about domestic companies and for fuzzy regulation structures that confuse prospective foreign investors. How true that is depends on your frame of reference, Johnson suggested.

“We tend to use the United States as a barometer, based on our proximity and the amount of business we do there,” he said. “I think certainly Quebec in particular has been quite adamant about the protection of its home-grown companies, and a lot of this does get politically driven. Whether it’s a good thing or a bad thing for a company to get taken over depends on the fact-specific circumstances.”

READ: Is Canada closed to foreign investment? »

And who is doing the buying may be just as important as what is being bought: a survey by the Asia Pacific Foundation of Canada last month found that Canadians prefer their state-owned acquirers to come from traditional trading partners and allies.

READ: Here are the countries Canadians wouldn’t trust to take over our businessess »

Corporate deals are at their highest level since the recession, and Canadian companies will continue to look to emerging markets to fuel their growth. Expect to see the maple leaf flying from a few more corporate headquarters in the coming months.

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