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CCCA61_027-031.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 2/8/08 11:52 AM Page 31 Feature “ level, we still generate cash and will continue on with Even if the credit market tightened to a ridiculous our business plans and maybe get even bigger bargains. Sean McMaster ” Executive vice-president, corporate and general counsel TransCanada Corporation, Calgary there,” says Richardson Capital’s Riley.“Take our firm, for exam- There’s also a lot of private equity available in pension funds and ple.We have a fund we raised a year and a half ago with $720 mil- other institutional sources, which are seeking a higher rate of lion, and we‘ve invested only 10% of it.We are being very cau- return than the stock markets have recently provided. The market tious about deploying those funds, because we are concerned might also express an interest in the kind of “growth equity” that about credit markets, but it is available.” focus, on firms at the beginning of their development. Gans agrees, pointing out that “all of these funds that you are Despite the opportunities, one hurdle for the management reading about that raised $20 billion in 2006 —– Blackstone, team to clear, Riley believes, is getting a true read on a compa- Goldman Sachs Capital Partners,The Carlisle Group — all have ny’s value after a year and a half of frantic activity, spurred on by money to deploy and have a limited time horizon in which to private equity buyers with lots of credit at low rates. deploy it.So I imagine that they will continue to seek new deals.” “If you,owned a business for a number of years and you’ve seen And,he adds,Canadian banks have become bigger players as the it climb in value, because of either the income trust market or the U.S.banks have pulled out.Non-banks are also players — General private equity bubble — the question is, what is your true value Electric, CIT, Wells Fargo, and others. But financing is more now? You’re used to the old value, but you have to get comfort- expensive now.“That’s because banks are less willing to be the sole able with what the real values are in a non-inflated sense.” underwriter and are looking to syndicate risks,” says Gans. After a tumultuous end to 2007,the experts agree that a much smaller market will emerge in 2008 and beyond.For the foresee- New source of capital able future,the $50 billion and $70 billion transactions complet- The reality is there is a lot of capital to be deployed in the world, ed just months ago will drop off, let alone the first $100 billion and that is a powerful counter to the reduction of liquidity from deal that everyone was anticipating, and there will be a lot more the banks. One new source is sovereign wealth fund (funds strategic buyers doing the deals. owned by sovereign states) — many from the Middle East, but “There still will be significant M & A transactions, but the also China, Singapore and Norway — that are thriving in part players will change and they will be done for different reasons,” because of high commodity prices. advises McMaster. “There will be less activity on the private “There is clearly a lot of money coming from sovereign wealth equity side and more corporate mergers — if Telus tried to take funds,” says Gans.“The $7.5 billion investment in Citigroup that Bell out today, it might be a different story. So the names will be was recently announced came from Abu Dhabi, and in Canada, different, but the deals will still get done.” one of the oil and gas income trusts is being bought by a sover- eign wealth fund.” Richard Skinulis is a writer from Richmond Hill. PRINTEMPS 2008 CCCA Canadian Corporate Counsel Association 31