Loonie's lustre does little for M&A

Posted by Niall McGee on November 12, 2009

Canadian companies are making fewer American acquisitions this year, according to figures compiled by Crosbie & Company. That's despite the increased purchasing power the strong Canadian dollar offers.

Sixty deals worth $10 billion have been announced year-to-date, compared with 129 transactions worth $13 billion in the same period last year.

So why hasn’t the strong loonie spurred more Canadian buyouts of American firms? Ed Giacomelli, managing director with Crosbie & Company, says the loonie has little impact on whether Canadian firms pull the trigger on deals. 

And he says this holds true whether the loonie is strong or weak versus the American dollar. (The loonie was languishing when I first came to Canada in 1998. Back then some were asking whether Canada should abandon the loonie entirely and adopt the greenback instead.)

Giacomelli says the health of the American economy and the state of the individual company being acquired are much bigger preconditions for getting cross-border deals done. 

 Another misconception, according to Giacomelli, is that American firms buy more Canadian companies than vice versa. While the big buyouts of Canadian companies garner a lot of press, he says the numbers tell a different story. Not only do Canadian firms consistently buy more American companies, he added, the dollar value is also higher.

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