By Maiya Keidan and Shariq Khan

TORONTO (Reuters) – Canadian mergers and acquisitions exercise for the third quarter hit its highest since 2016 as traditionally low rates of interest and powerful fairness markets helped corporations to revive transactions that had been placed on maintain as a result of pandemic.

Dealmaking rose 27.7% to $76.6 billion within the third quarter of the yr, however was considerably down from the report $120.3 billion recorded within the first three months of the yr, in accordance the Refinitiv knowledge.

Bankers stated whereas elements underpinning M&A exists and pipelines are robust, fairness market volatility might gradual the deal momentum.

“Larger deal movement within the third quarter was pushed by a mixture of things together with robust fairness markets, traditionally low borrowing prices and market confidence in a gradual COVID-19 restoration,” stated Jake Lawrence, Group Head and CEO, International Banking and Markets, Scotiabank.

Nonetheless, he stated brief time period inflationary and provide chain issues are unlikely to have a fabric influence on deal movement given investor give attention to long-term strategic concerns.

Transportation and infrastructure-focused offers led exercise within the third quarter, with $33.6 billion in M&A exercise, together with Brookfield Asset Administration’s A$9.57 billion ($6.95 billion) bid for Australia’s AusNet Providers, and Brookfield’s $3.4 billion deliberate takeover of Dexko International Inc.

Larger inflation in Canada and america has stoked worries about central banks dialling again pandemic-era liquidity assist and prospects of upper rates of interest. That has elevated inventory market volatility.

“I suppose the massive risk that is overhanging the M&A panorama is the specter of rising rates of interest,” stated Sarfraz Visram, head of Canadian and worldwide mergers & acquisitions at Financial institution of Montreal.

“M&A is so much simpler to do when everyone is having fun with a robust fairness market however I’d say that valuation multiples had been getting fairly excessive … it was laborious to justify doing offers at peak multiples,” he added.

Of the offers introduced within the first 9 months of 2021, Financial institution of America Corp (NYSE:)’s BofA Securities Inc, Financial institution of Montreal’s BMO Capital Markets and Toronto Dominion Financial institution (NYSE:)’s TD Securities Inc took the highest three spots within the advisory rankings.

Regardless of the robust inventory markets, fairness choices fell for the second consecutive quarter, virtually halving within the third quarter to C$6.8 billion ($5.42 billion) from the earlier quarter, whereas IPOs dropped by almost a tenth within the third quarter to C$332 million from the earlier three months.

($1 = 1.2549 Canadian {dollars})