(October 30, 2011) — Canada’s big banks and pension funds have driven the country’s mergers-and-acquisitions activity in the third quarter, according to PricewaterhouseCoopers.

The firm revealed that the number of announced deals rose 8% to 756, with the value of those deals reaching around C$51 billion (US$51.4 billion), up about 1% from a year earlier. The report revealed that excluding pension-fund deals, the value of M&A activity in the third quarter was 25% lower than in the second quarter.

“This quarter was characterized by opportunistic buying and selling by Canadian banks, pension funds and REITS,” Kristian Knibutat, PwC’s Canadian deals leader, said in a statement. “Even the mining sector, a traditional M&A leader in our market, saw a decline in activity. An absence of ‘mega deals’ in base metals and ores drove down quarter- over-quarter deal values in the materials sector by close to 66%.”

Furthermore, the report noted that while Ontario and Quebec continue to be the premier investment destinations for Canadian business, the global commodities boom has buoyed the market share of Canada’s western provinces.

According to PwC, Canadian pension funds, either as leads, co-leads, or as part of a buying or selling consortium, were involved in deals in the third quarter worth more than C$15 billion, up 40% from the second quarter. The firm noted that the biggest deals in the third quarter included Cheung Kong Infrastructure Holdings Ltd.’s C$3.8 billion acquisition of Northumbrian Water Group from a group including Ontario Teachers’ Pension Plan, one of Canada’s three biggest pension funds.

Among other top deals: CPP Investment Board, along with Canadian pension fund Public Sector Pension Investment Board and Apax Partners, a US private-equity fund, agreed in July to acquire Kinetic Concepts Inc. (KCI) for roughly US$5 billion. The partnership between the buyout firm and the pension funds – though not a common one – proved mutually beneficial: the deep pockets of institutional investors allow buyout firms to make deals even when the credit-market is relatively weak. 

Meanwhile, entering into a deal together with investors can promote future relationships, the schemes noted following the partnership. “We are delighted to have the opportunity to partner with CPPIB and PSP Investments to support the company’s continued growth,” said Buddy Gumina, co-head of Apax Healthcare, in a press release from CPPIB. For pension funds, the benefits of such partnerships include specific targeting of their investments and pursuing long-term growth. André Bourbonnais, the senior vice president of private investments for CPPIB, said, “KCI’s business is well positioned for growth based on global trends such as demographics, including longevity and an aging population. Together with KCI’s management, Apax and PSP Investments, we look forward to building upon KCI’s leading market shares and positioning the company for continued long-term success.”