Where did the 40% rise in M&A happen?

The number of Canadian M& A transactions remained relatively unchanged from the previous quarter at 268 transactions.  Cross-border activity, mega-deals and financial sponsors all played a significant role in driving up the value of Canadian M&A as each category saw significant improvements over the second quarter. 

Overall, it is exciting to see that Canadian M&A activity demonstrated a strong recovery in Q3 with a 40% increase in deal value to approximately $48 billion.  

Four interesting points for the Q3 results:

1. Canadian buyers continued to be acquisitive abroad, outnumbering foreign acquisitions of Canadian businesses by a ratio of 2.2-to-1
2. Bucking the trend, the value of Canadian-led acquisitions abroad exceeded that of foreign-led takeovers by a ratio of 4.1-to-1
3. Activity in the mega-deal segment of the market (deals valued in excess of $1 billion) rebounded to ten transactions valued at $32.2 billion
4. The Real Estate, Oil & Gas and Industrial Products sectors were the key drivers of M&A activity in Q3 representing 53% of announced transaction volume 

Mad rush to China for Private Equity

In a rush to tap China's booming private equity market, Morgan Stanley will be partnering with the eastern city of Hangzhou to launch yuan-denominated funds.

Morgan Stanley has signed a partnership agreement with the local government and has decided to establish its China headquarters for private equity investment in the city, the Hangzhou government said on its website.

Morgan Stanley and its partner aim to raise 1.5 billion yuan ($225 million) in the initial phase, a source with direct knowledge of the plan told Reuters. It will invest in non-public companies.

Earlier this week, Chinese media reported that U.S. private equity giants Warburg Pincus WP.UL and Kohlberg Kravis Roberts & Co (KKR.N) planned to set up units in Shanghai to launch yuan funds, following in the footsteps of rivals Blackstone, Carlyle and Bain Capital.

China is encouraging the development of the private equity industry, hoping to channel more liquidity into the private sector to aid economic growth. Beijing also expects to use foreign expertise to improve corporate governance.

"We hope that the partnership with Morgan Stanley would help boost private sector investment, accelerate economic restructuring and boost the local private equity industry," the Hangzhou city government said in a statement.

Groupon - Who Knew?

"I don’t know the third act of the transformation of media," says Michael Eisner of Disney fame. "I don’t even think we know the second act. We’re probably still in the first act or the prologue."
With the surprising offer for Groupon at $6B (yes, BILLION) from Google, there are reasons that it is hard to see where the next venture capital hit will emerge.
As Michael Eisner puts it: 
"I’ve gone to conferences where some people are getting carried around on top of shoulders like they just won the Super Bowl, and two years later it’s “whatever happened to that guy?” I sat at the Allen & Co. conference a couple of years ago and this guy Mark Pincus [CEO of Zynga, the company behind Farmville] was sitting at the table. Who knew that two years later he would have the best room at the lodge?"
Well done to pushing through the hard times, Groupon and Zynga. Let's keep at it.
Footnote: 
Here is BNN show, The Pitch, from a week ago, where business owners talk about their companies and are seeking investment capital. The private equity people have not heard of Groupon. I am sure they know the name now. 

http://watch.bnn.ca/#clip379746

India making Private Equity exits difficult

A regulatory backlash against Indian microlenders is complicating the exit strategies of private equity and venture capital investors.The practice of focusing on loans in poor areas largely shut out from traditional banking services gained prominence globally when Muhammad Yunus won the Nobel Peace Prize in 2006 for his role in founding Bangladesh's Grameen Bank. 

Microlending in India has expanded at an average annual rate of 62 percent over the past five years in terms of number of customers and 88 percent in loan volume, according to Micro-Credit Ratings International, a rating firm in Gurgaon, India.

The tougher regulations in Andhra Pradesh, a southern state that accounts for 30 percent of India's microlending market, arose from concerns about overlending to low-income borrowers, interest rates as high as 50 percent, and coercive debt-collection techniques that the state government claims have led to impoverishment and suicides by borrowers. There were 9.6 loan accounts for every poor household in the state, according to a report released on Nov. 15 by the nonprofit group Access Development Services. The upshot? "I don't think private equity investors will recover their money at the rates they thought they would," says Sanjay Sinha, managing director of Micro-Credit Ratings International.

Here's a seasonal surprise

Junk food choir takes the world by storm. This is sheer delight. Turn up loud and set to full screen.
And it's Canadian.