M&A Summary: Q3 2019 - Technology & Life Sciences

November 07, 2019

Deal volumes involving Canadian technology businesses were up during the last four quarters and ended Q3-19 (L4Q19) with 389 deals announced or closed during the period (127 of which came during Q3-19). This represents an 18% increase from the 329 transactions announced or closed in 2018. There has been an increase in the L4Q19 period with the past three quarters being quite strong relative to historical periods.

An interesting observation is the decreasing percentage of foreign companies acquiring Canadian tech businesses. During the first three quarters of 2019, we noted that only 25% of transactions included a buyer domiciled outside of Canada, whereas in the past two years that percentage has been closer to 35%. Meanwhile, the technology sector has ranked higher than in previous years in terms deal volume and size relative to other Canadian industries. In Q3 of 2019, technology ranked 4th and 5th respectively in both the number of M&A transactions and total dollar values of transactions. M&A activity in technology has remained stable or grown during recent quarters, whereas industries such as manufacturing and food & beverage have recently slowed. This points to the continuing development of Canada into one of the global leaders in technology holding a number of attractive, growing acquisition targets.

One of the most interesting deals in this sector is the acquisition of 6 River Systems, Inc. (“6 River”) by Shopify Inc. (“Shopify”) as part of Shopify’s fulfillment network initiative. 6 River is a leader in the robotics industry that offers a product which uses mobile robots and cloud-based enterprise software to improve warehouse staff productivity and simplify training. Shopify expects this acquisition to have "no material impact" on its top line for the current fiscal year, but it will increase its expenses by about USD$25 million. Despite the negative short-term impact, Shopify sees this initiative as a necessity to maintain its competitive advantage and help attract more merchants to its platform. Clearly, this move will put Shopify further in direct competition with Amazon, but it will also give the e-commerce giant a leg up on Square and other companies looking to enter this lucrative space.

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Select Technology Transactions - Q3 2019
Date Target Buyer Deal Description
09/09/2019 6 River Systems, Inc. Shopify Inc. (NYSE:SHOP) Shopify Inc. (NYSE:SHOP) entered into an agreement to acquire 6 River Systems, Inc. from Eclipse Ventures, LLC and others on September 9, 2019. Under the terms of consideration, Shopify agreed to a transaction value of approximately $450 million payable in cash and stock. The acquisition is expected to close in the fourth quarter of 2019. Shopify will maintain the 6 River Systems brand and headquarters in Waltham, MA. 6 River Systems' team of more than 130 employees will be retained by Shopify.
07/18/2019 HighQ Solutions Limited Thomson Reuters Corporation (TSX:TRI) Thomson Reuters announced on July 2018, 2019 that it has acquired HighQ, a leading collaboration platform for the legal and regulatory market. Based in London with offices in the United States, Germany, the Netherlands, Australia and India, HighQ offers a secure cloud-based platform for business collaboration, workflow automation and client engagement.
08/03/2019 Cryptologic Corp. (CNSX:CRY) Canadian Business of Wayland Group Corp. The Canadian Business of Wayland Group Corp. (CNSX:WAYL) (‘Wayland’) entered into a non-binding letter of intent to acquire Cryptologic Corp. (CNSX:CRY) in a reverse merger transaction on August 2, 2019. It is expected that, prior to closing, Cryptologic will sell the business and assets comprising its existing cryptocurrency mining and other operations and that it will be a single-purpose cannabis company.
07/17/2019 IKentoo Lightspeed POS Inc. (TSX:LSPD) Lightspeed POS Inc. a leading provider of software, solutions and support systems to more than 49,000 small and medium-sized retail and restaurant locations worldwide, announced that it has completed the acquisition of Switzerland-based iKentoo, a POS solutions provider to small and medium-sized businesses operating within the hospitality industry.