The five most important lessons about mergers and acquisitions for 2016

It was an unexpectedly active year for M&A activity, with Canadian companies acquiring abroad and even repatriating brands that had once flown the coop

 

Foreign takeovers are risky, part one

Remember Viterra? It’s the former Saskatchewan Wheat Pool that was acquired by Swiss conglomerate Glencore International in 2012 for $6.1 billion. In April a 40% stake in its parent, Glencore Agriculture Products, was quietly repatriated by the Canada Pension Plan Investment Board for US$2.5 billion as Glencore shed assets to pay down debt. It’s a story oft repeated, where a foreign giant swoops in to buy a Canadian resource company at the top of the market, only to regret it later. Think: Nexen, Alcan, Inco and Falconbridge. Maybe it’s time to put more faith in canny Canadian investors who know these volatile industries better than anyone.

Foreign takeovers are risky, part two

As Enbridge Inc.’s pending $37-billion takeover of Houston-based Spectra Energy Corp.—which will create Canada’s largest company—shows, mega-deals can go both ways across the border. Given what’s taken place here, Enbridge likely knows it ain’t worth it just for bragging rights.

Sometimes you just take the cash

Calgary’s one-time digital darling Smart Technologies has had a rough time since going public in 2010. The maker of electronic smart boards was squeezed by shrinking school-board budgets and a failed foray into the business market. The resignation of founders David Martin and Nancy Knowlton four years ago was only a temporary reprieve. In May the company accepted an offer from Taiwan’s Foxconn Technology Group—yes, that Foxconn, the iPhone-maker infamous for its suicidal employees. It’s not the fairy-tale ending many wanted, but it gave shareholders $4.50 a share in cash (up from a low of $2.19 in January) and demonstrated the value of knowing when to abandon a dream, take the money, and move on.

Baggage isn’t sexy

November saw Montreal-based Gildan Activewear bid $66 million for the intellectual property and other assets of American Apparel, a troubled clothing company. It’s already precarious position was exacerbated when Canadian founder Dov Charney was ousted in 2014—that had just filed for bankruptcy for the second time in 13 months. Gildan opted not to buy the chain’s nearly 200 stores, and may or may not continue to operate its U.S. factories. It seems American Apparel’s brand has value, but its considerable corporate baggage does not.

“Co-opetition” works

For years QHR Technologies (recently acquired by Loblaw Cos.’ Shoppers Drug Mart) and Telus Health (a division of the telecom) fought tooth and nail to get health authorities to digitize patients’ medical records using their respective systems. Then, in June, they agreed to work together to achieve seamless interoperability (so if a person moves from one province to another, their records follow them). Evidently, like Microsoft and Apple before them, they realized that their rivalry was hampering the growth of their market.

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