AlphaRank Merger Monitor -Canada For Sale?

February 28, 2025 — The recent 4 Nations Face-Off, a hockey tournament featuring NHL players from Canada, U.S., Finland, and Sweden, showcased the best hockey a fan could ask for.

In an environment of heightened geopolitical rivalry, fueled by increased nationalism and continuous trade war threats, the initial Canada versus U.S. game reflected the current tensions between the two great nations. As soon as the puck dropped, shortly after Canadian fans booed the U.S. national anthem in Montreal, the game descended into chaos. Three fights broke out on the ice in the first nine seconds of the first period. Relations between the two squads were strained, to say the least, and both were playing like they had something to prove.

While it was, ultimately, an extremely competitive game, the Americans followed the early-game fisticuffs victorious, with a 3–1 win over their biggest rivals (and allies). Up north, it was a tough pill to swallow. Not only were the Canadians being walloped by their southern neighbours economically, but now on the ice too. Nevertheless, the highly-skilled Canadian team maintained their composure, decisively besting Finland 5–3 the following game to set up a highly-anticipated rematch with the Americans in the Championship final.

The championship game featured an action-packed back-and forth, with each team scoring two highlight-reel goals, ending the third period in a 2–2 tie.

At 8:18 into overtime, Mitch Marner passed the puck from the corner to a wide-open Connor McDavid in front of the net, who sealed the deal with a one-timer and a 3–2 overtime win for Canada. I don’t care who your goalie is, but if you leave the greatest player in the NHL open in the slot, he will bury that puck in the back of the net 100% of the time.

Alas, Canada tasted victory on arguably the biggest stage (at least it was that evening).

Although, the way the Americans dominated Canada in their first game, both in fights and goals scored, is analogous to the current state of play in mergers and acquisitions. Most recent Canadian buyouts have featured U.S. buyers, which begs the question — Is Canada for sale?

Two macroeconomic factors that have made Canadian targets attractive to U.S. buyers.

The first is currency. The Canadian dollar has been walloped over the past year, dropping -5.9% versus the U.S. dollar. Canadian corporations have become cheaper for U.S. acquirors and their highly-valued greenbacks.

The second is relative equity valuations. U.S. exceptionalism has permeated throughout the capital markets, with American equity valuations trading at highs compared to their historical averages and relative to other markets. Comparatively, Canadian equities have not experienced the same lift in sentiment. As a result, Canadian stocks now trade near a record discount compared to their American brethren. Currently, Canadian stocks have an average valuation of approximately 25% lower than U.S. equities.

A cheap currency and attractive relative valuations have set Canadian firms as prime targets for U.S.-based acquirors. This dynamic has manifested through recent M&A activity, with a large proportion of Canadian buyouts featuring American acquirors bearing their stronger currency:

• On December 23, 2024, Wisconsin-based Fiserv, Inc. announced the acquisition of Toronto-based Payfare Inc. for $4.00 cash per share, representing an 89.6% premium and a $201.5 million deal.
• Next, on December 31, 2024, St. Louis-based World Wide Technology Holding Co. announced that it would acquire Toronto-based Softchoice Corporation for $24.50 cash per share, representing a 31.6% premium and $1.8 billion deal value.
• Shortly thereafter, on January 2, 2025, Miami-based private equity firm H.I.G. Capital announced the buyout of BC-registered and TSX-listed (although Texas-headquartered) Quisitive Technology Solutions Inc. for $0.57 cash per share, a $169.1 million deal struck at a 50.0% premium.
• Lastly, on February 7, 2025, H.I.G. Capital returned to Canada with a $1.3 billion buyout of Toronto-based Converge Technology Solutions Corp. for $5.50 cash per share and a 55.9% premium.

Including the November 2024 announced $12.1 billion acquisition of CI Financial Corp. by Abu Dhabi’s Mubadala Investment Company, the majority of recent Canadian public company targets have gone to foreign buyers, primarily American.

Until this week, the Americans dominated the Canadian M&A market like team U.S.A. did in the first match-up between the countries in the 4 Nations Face-Off. Not only were they the primary buyers of TSX-listed acquisition targets, but they were also using their highly-valued currency to pay top notch prices. The four recent Canadian buyouts by U.S. acquirors featured an average takeover premium of 56.8%, compared to the historical average premium of 48.1% and a median of 33.8%.

However, just as the great Canadian Connor McDavid saved the team (and arguably, the country) in overtime to win the 4 Nations championship in overtime, this week, the great Canadian pension fund CDPQ came to the rescue of the Canadian M&A market, announcing a $10 billion acquisition of Quebec-based Innergex Renewable Energy Inc.

Whether it was purely opportunistic from an investment perspective or featured a hint of national pride, the nearly $500 billion Canadian pension giant emphatically planted its flag in the ground, implying that Canada is perhaps not entirely for sale.

Elsewhere in the world of mergers and acquisitions, the North American M&A market remained tepid in February. There were 11 public mergers announced in the U.S., representing an aggregate transaction value of $22.6 billion. The largest deal was Herc Holdings’ $5.6 billion announced acquisition of H&E Equipment Services, a deal that topped United Rentals’ initial $4.8 friendly bid for H&E. As for Canadian corporate activity, aside from the Converge Technology and Innergex Renewable deals, there were two additional transactions, including a $2.8 billion all-share merger between Calibre Mining and Equinox Gold, along with a small subscription receipt deal from InPlay Oil.

Thus far, the much-ballyhooed forecasted Trump Bump in merger activity remains wanting. Until then, we expect U.S. acquirors to maintain their deal sights set on Canadian small and mid cap corporations.

The AlphaRank.com Merger Monitor below represents Accelerate’s proprietary analytics database on all announced liquid U.S. mergers. The AlphaRank Merger Arbitrage Effective Yield represents the average annualized returns of all outstanding merger arbitrage spreads and is typically viewed as an alternative to fixed income yield.

Each individual merger is assigned a risk rating:

• AA — a merger arbitrage rated ‘AA’ has the highest rating assigned by AlphaRank. The merger has the highest probability of closing.
• A — a merger arbitrage rated ‘A’ differs from the highest-rated mergers only by a small degree. The merger has a very high probability of closing.
• BBB — a merger arbitrage rated ‘BBB’ is of investment grade and has a high probability of closing.
• BB — a merger arbitrage rated ‘BB’ is somewhat speculative in nature and has a greater than 90% probability of closing.
• B — a merger arbitrage rated ‘B’ is speculative in nature and has a greater than 85% probability of closing.
• CCC — a merger arbitrage rated ‘CCC’ is very speculative in nature. The merger is subject to certain conditions that may not be satisfied.
• NR — a merger-rated NR is trading either at a premium to the implied consideration or a discount to the unaffected price.

The AlphaRank merger analytics database is utilized in running the Accelerate Arbitrage Fund (TSX: ARB), which may have positions in some of the securities mentioned.

* AlphaRank is exclusively produced by Accelerate Financial Technologies Inc. (“Accelerate”). Visit Alpharank.com for more information. Disclaimer: This research does not constitute investment, legal or tax advice. Data provided in this research should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information in this research is based on current market conditions and may fluctuate and change in the future. No representation or warranty, expressed or implied, is made on behalf of Accelerate as to the accuracy or completeness of the information contained herein. Accelerate does not accept any liability for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on all or any part of this research and any liability is expressly disclaimed. Accelerate may have positions in securities mentioned. Past performance is not indicative of future results.